Tomorrow, the Cato Institute publishes a report titled “How Urban Planners Caused the Housing Bubble.” Faithful readers of the Antiplanner can download a preview copy today.
This report will probably not change the minds of any Antiplanner readers, but there are still lots of people who think that the United States as a whole suffered a housing bubble in the last several years. As the report shows, there were clear bubbles in fewer than 20 states, most of which had some form of growth-management planning (see table 1 on pp. 12 and 13).
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Those who claim the bubble was caused by low interest rates, easy credit, or similar national causes have to explain why fast-growing states like Georgia, North Carolina, and Texas did not have a bubble. Remarkably, according to data published by the Federal Housing Finance Agency, housing prices never declined in such major (and relatively unregulated) metropolitan areas as Houston and Dallas. If there was a national housing bubble caused by the Federal Reserve Bank or some other central authority, this could hardly be the case.
Antiplanner: (Page 21): As Paul Danish, the city council member
whose plans made Boulder, Colorado, housing less affordable than 90 percent of the other urban areas in the United States, says, Boulder housing prices are high solely because it is “a really desirable place to live,â€
JK:
“a really desirable place to live,â€
WOW! Just like the nitwits in Portland say over and over.
I bet they all say that, in every one of those areas the planners screwed up.
Thanks
JK
Oops
Page 22, bottom left column.
Thanks
JK
It is a stretch to say that planning laws caused the crisis. The evidence provided perhaps points to free market planning being more flexible in response to demand, so the effects of the bubble were much less.
The evidence provided perhaps points to free market planning being more flexible in response to demand,
JK: But isn’t that the same as saying the lack of a free market is responsible for the problem? Dictatorial planning being the lack of a free market.
Thanks
JK
I can’t speak for Georgia and North Carolina, but I experienced the housing bubble that crashed in Dallas and Houston in the late 1980’s/early 1990’s. My parents home price remained stagnant for close to 10 years before they were able to sell it. The taste was still fresh in the mouths of most Texans, especially in the more established Dallas and Houston metro, to have given in to massive speculation seen elsewhere in the country. Austin, on the other hand, has experienced a bubble, but it has been tempered somewhat by the steady influx of nearly 500,000 people over the last decade.
Well here is a quick recap: http://www.youtube.com/watch?v=bNmcf4Y3lGM
I agree with TexOkie. I don’t know why Texas, and in this case Dallas, is getting a free pass from ROT. I live in suburban TX where there are 3 foreclosed houses on my block that have been on the market for over a year. No housing bubble?!?!?!? Not from where I’m standing (deep in the heart of Texas).
Also, isn’t big d adopting a form-based code now that they have a comprehensive plan? Doesn’t the form-based code allow for more NU style development and less SF sprawling type developments? Is this not growth management?
I’m starting to see a disturbing trend with ROT’s posts lately. He states that he is “opposed” to subsidies and growth management. But he rarely (and never substantively) expresses oppositions to subsidies or growth management that results in highway building or SF sprawl type development. I’m beginning to think that he is no better tan the elitist that he criticizes. How am I not to believe that ROT just wants people to live the way he thinks they should, driving a car, living in a big house on a big lot? To me, it hardly seems like advocacy for freedom.
As for the Boulder discussion…
Why is it that the anti-growth management crowd only looks at the supply side of the equation? I do not disagree that the growth management policies in Boulder have limited the supply of housing which has resulted in a increase in housing prices. But, I also believe that the growth managment policies in Boulder have made the city a very attractive, and a more desirable place to live. The demand was fostered through the policies as well.
JK and ROT agree that:
‘“a really desirable place to live,â€
WOW! Just like the nitwits in Portland say over and over.’
Yet they both live in Portland (I think) and not in Houston. Why is that? Could it be that places like Portland and Boulder are nicer places to live than Houston? I certainly think so. And maybe, just maybe, their growth management policies have something to do with why (IMO) those places are nicer.
Growth management policies did not cause the housing bubble.
Runaway credit expansion by governmental decree did.
Much as I’m anti-subsidized-new-urbanism, this isn’t one of the corpses we can lay at the planners’ feet.
I’d disagree that there were no housing bubbles in these states. Georgia is one of the leading states for foreclosures.
Urban planners created AIDS and cancer…and H1N1
Antiplanner (and others),
Would you support strictly classifying the house as either/or:
-a non-taxable-necessity (like food in some states)
OR
-an investment class, treated as stocks and other capital gains producing assets?
So a thought on the recession “begun by housing” (thus planners…):
There are approximately 5 million homes (existing) sold a year.
Since the price peak in 2006 when the median was approx $230K the median has dropped to $180K.
Let’s call that, very conservatively, $50K lost on each sale for the last two and half years = $7.7 Billion in home value losses.
October 2007 to March 2009 the US stock market lost $11 trillion ( here).
Housing losses conservatively are 7% of the stock market losses.
If the housing bubble was irrationally exuberant and it “began” this financial crisis, then the financial markets’ reactions have been disproportionately crazier. 14 times crazier, in fact.
And both the Case-Shiller and NAR data include distressed sales…so all those sub-prime foreclosures which incited the “panic” are factored in to the previous home value loss calculation.
Assuming the bulk of those were from high interest rate resets and NOT an inability to pay a standard interest rate mortgage, one might argue it was the financial market’s inability to respond to its own shortcomings which “began” the crisis. Their losses on foreclosures would have been much less had they just reset the rates to reasonable levels instead of letting them go to foreclosure.
This was an energy bubble. Affected Louisiana too. Discussed in the paper, too.
Bad assumption. Very bad assumption. I’ll have to find the Fed study, but the thesis that high interest rate resets are responsible is not tenable given the housing data. The problem is that people and banks expected prices to go up forever (and quickly), so everyone was willing to sign mortgages based on that increasing value. “You can always refi! Prices never go down!”
There was no housing bubble. Non sequitur. Once the financial crisis started and unemployment started going up, people losing their jobs lost their houses. But the data simply does not support a housing bubble.
Doesn’t explain prices jumped so much in some states but not others. The credit expansion helped, and you can argue (as Randall does in the paper) that there probably would have been another bubble somewhere else. But it wouldn’t have been a housing bubble. The tech bubble at least produced more lasting benefits, IMO.
But more people are moving into Houston than Portland and Boulder. If two people choosing to live in Portland means that Portland is better, then by your logic even more people choosing to live in Houston means Houston is even better.
Prices didn’t go up, and they haven’t gone down. Ergo, it’s not a bubble. There are foreclosed houses for traditional reasons, that people lost their jobs. That doesn’t make it a bubble, it makes it a really bad recession. And besides, as bad as you think your area is, California is much, much worse.
Please stop equating “there are foreclosed homes on my block” with “we had a housing bubble.” Everywhere is having foreclosures because of the crappy economy and job loss. But if home prices didn’t zoom up and haven’t gone down (or gone down hardly), then by definition it’s not a bubble.
Regarding Texas, Texas has only the 29th highest foreclosure, and it’s actually down from last year. It’s still bad, but the really bad states have foreclosure rates 6 to 10 times that of Texas. Texas did have its foreclosure rate go up rather quickly in the beginning compared to other states, but it never got as high as the worst states. It seems like Texas may have gotten its foreclosures “out of the way” quicker than some other states.– Several states adopted foreclosure moratoriums that mostly only delayed the pain.
Michigan never had a “bubble,” but it’s still had a lot of foreclosures, because its economy has just been terrible. Georgia has unemployment above the national average, which doesn’t help.
I wonder if any of the Antiplanner’s Smart Growth commenters noticed that he also railed against large-lot zoning in the paper several times.
The problem with Smart Growth is that their tactics involve planning and empowering the neighbors, and the neighbors will always frustrate higher density by gaining control of the planning process.
One problem with just looking at option ARMs is that option ARMs are concentrated in the most bubbly areas. Why? Because prices had gotten so high relative to income that people couldn’t afford a regular old fixed rate mortgage; the option ARM and hoping to refi was their only hope to own. And with Realtors and everyone from industry to government singing the praises of home-owning and saying the prices would always go up, it seemed like what they had to do.
John,
Regarding Dallas, you missed my point. I’m not arguing weather or not there was a housing bubble there (though I do in other parts of TX). I’m stating that there is a lot of top down, smart growth, New Urbanism, style planning happening the city. I’ve personally worked on several of these projects. Codes, regulations, and ordinances have been adopted most with smart growth principals incorporated into them. With all of this “planning” happening in Dallas, and if there really was no housing bubble in Dallas, how can be that “Urban Planners Caused the Housing Bubble”?
As for “prices didn’t go down.” B to the S. Check out the county tax office web sites in most urban areas in TX. Prices have go down my friend. Appraisals have gone down too. Not saying it’s worse than CA, but your obvious lack of data to support your claim that no bubble has happened in TX is leading you down a false road.
Bottom line. Texas has felt the housing bubble, and Dallas practices Smart Growth in many respects. Therefore I conclude that ROT is going to have to get some real data to explain how “Urban Planners Caused the Housing Bubble.”
“But more people are moving into Houston than Portland and Boulder. If two people choosing to live in Portland means that Portland is better, then by your logic even more people choosing to live in Houston means Houston is even better.”
Not my logic, my opinion. You putting words in my mouth. I don’t discount that more people are moving to Houston. But while you and ROT think it’s because there is no land use regulation I think it has way more to do with the petro/chem industry (JOBS) there that seems to have been magically unscathed by the current recession.
I “FEEL” that Portland is a nicer place that Houston (I’m not trying to prove it quantitatively). My guess is that Karlock and ROT “FEEL” the same way (but I’m not claiming to know for sure). My comment was to try and entice them to assess why they choose to live in a place that the lambaste so much, and not the place they choose to give unadulterated praise. Could it be that what is keeping them in Portland is a direct result of government planning? That is what I’m getting to.
bennett said: My comment was to try and entice them to assess why they choose to live in a place that they lambaste so much, and not the place they choose to give unadulterated praise.
THWM: Mr.O’Toole isn’t a resident of Portland. He resides almost 200 miles to the south, though I know what you are getting at. If they hate Oregon so much, why are they still there?
John, there was a saving’s & loan scandal in there that worked in tandem with the energy bubble to create a moderate housing crisis.
“Not my logic, my opinion. You putting words in my mouth. I don’t discount that more people are moving to Houston. But while you and ROT think it’s because there is no land use regulation I think it has way more to do with the petro/chem industry (JOBS) there that seems to have been magically unscathed by the current recession.”
a) It’s not magical; it’s about being able to do business
b) Take a look at the energy sector and you’ll see one that’s been clobbered, especially natural gas.
I think people are forgetting the very speculative nature of housing bubbles. Attractive areas command higher dollar and are more sensitive to housing booms (and ultimate busts). No offense, but Atlanta is not really that attractive design wise or geographically, neither is Dallas or Houston. That is not why those cities are attractive to new people, anyways.
I also think there is a huge gap between cities and their actual “smart growth” laws. Let’s not lump every city/state and their respective land use codes as “smart growth” and end the discussion there. How do we define smart growth in the first place?
I’d like to know where the discussion is of Pheonix and Las Vegas, two of the biggest housing bubbles in the country. I’m sure some spin will be done to show they are the “leading” smart growth cities in the nation because they preserve land on their urban fringe – but that does not account for the fact that they had plenty of supply of housing and built some of the most residential homes in any city of the country during their peak.
Blaming smart growth and planners is really just a witch hunt. This is really just more of the same from ROT in his paper: Portland vs. Houston.
Houston is certainly growing, but it gained a lot of people from Hurricane Katrina.
ws is correct: smart-growth planning did not cause the housing bubble, and his examples of Phoenix (o before the e) and Las Vegas are good examples of such.
The Arizona economy has historically been driven by the “five Cs”: Copper, Cotton, Cattle, Citrus, and Climate (Tourism). Cotton has diminished somewhat due to overseas-produced substitutes. Copper mining is still huge, some two-thirds of the nation’s output. But Climate — Tourism — is what experienced phenomenal growth in modern times and was an amplifying factor of the housing bubble. It’s a resort state. Partying away on warm desert nights out by the pool — this sells plane tickets and hotel rooms, influences relocation decisions, attracts businesses looking for a home where work is rarely impacted by weather, and, eventually, drives home-buying decisions. The transplant population is huge.
There are indeed smart growth policies in effect in Arizona, but there is also a great deal of available land. You won’t see a Portland scenario here, except possibly in landlocked Tempe, which has been naturally densifying for about 15 years now, and for which “smart growth” isn’t going to promote much different result now than “unchecked growth,” because of the physical realities of the situation.
I reiterate: expansionary credit policy caused the housing bubble. Not urban planning. Thacker replied that it doesn’t explain the bubble differential between states; I reply that it doesn’t have to. Any economic impact, however broad, is likely to have regional variation.
A bubble is an overvaluation of an asset. If, as AP contends, home prices increased by market forces on account of an artificial supply constraint (planning), then the increase in valuation is reasonable and predictable, economically speaking. According to the AP, consumers bid up homes in response to a very real scarcity (artificial or not). That is hardly a bubble by economic standards: the scarcity will remain when consumer demand returns.
t g said: A bubble is an overvaluation of an asset. If, as AP contends, home prices increased by market forces on account of an artificial supply constraint (planning), then the increase in valuation is reasonable and predictable, economically speaking. According to the AP, consumers bid up homes in response to a very real scarcity (artificial or not). That is hardly a bubble by economic standards: the scarcity will remain when consumer demand returns.
THWM: That still doesn’t explain banks making so many bad loans.
t g said: “A bubble is an overvaluation of an asset. If, as AP contends, home prices increased by market forces on account of an artificial supply constraint (planning), then the increase in valuation is reasonable and predictable, economically speaking. According to the AP, consumers bid up homes in response to a very real scarcity (artificial or not). That is hardly a bubble by economic standards: the scarcity will remain when consumer demand returns.”
The problem with the above is that by that logic there is NEVER a bubble. Something, some imbalance, and often times two or more things, lead to the bubble. It doesn’t mean the bubble isn’t a bubble. They’re not acting as they otherwise would.
The housing bubble is still a bubble because a bubble is a situation where market prices are unsustainably high. In the case of housing, they reached levels where the market couldn’t sustain the volume nor the pricing.
THWM –> Banks were making those loans because Fannie and Freddie were buying them up left and right. Investors were willing to sink money into those mortgage backed bonds, of which IIRC Fannie and Freddie accounted for 2/3 of the market, because in large part Fannie and Freddie were making guarantees on their returns…. even for subprime pools! No, it’s not that those two along with artificially low interest rates caused all of it, but they were a huge factor.
“I think people are forgetting the very speculative nature of housing bubbles. Attractive areas command higher dollar and are more sensitive to housing booms (and ultimate busts). No offense, but Atlanta is not really that attractive design wise or geographically, neither is Dallas or Houston. That is not why those cities are attractive to new people, anyways.” –WS
But, as you go on to point out, Phoenix and Houston aren’t exactly “attractive” yet they had bubbles.
The problem is, that, and not to single you out, we need means of measuring differences when it comes to what constitutes attractive. For some it’s being able to afford a mortgage for a house. Others may find having a good job attractive. Others care less about their job or income and instead find living in small town very attractive.
Really, this “better than” / “more attractive” stuff is like wine. Wine as several different auroma wheels to help measure and specify the tastes/auromas of the wine. We need one here because everyone has a different opinion on what constitutes attractive.
prk66: The problem with the above is that by that logic there is NEVER a bubble.
I’d disagree. The defining feature of a “bubble” seems to be the speculative nature of the pricing (I hedge here with the word “seems” as even economists appear incapable of providing a quantifiable, empirical definition of a bubble). In a bubble, investors (note: not consumers) bet that prices will continue to trend up without consideration to “intrinsic value.”
My point is that the scarcity of housing (vis-a-vis demand from potential buyers) which AP argues caused the increase in price setting is a very real and reasonable factor in asset valuation. It is a fundamental characteristic of “intrinsic value”. It may be artificial, but it is no less real as a constraint on supply. That being the case, the house as an asset in a supply constrained market would not be overvalued if its price was increasing on account of that limited supply. Consequently, no bubble.
Thus I find it odd that AP would so willingly grab the “Bubble” term, for (purely semantically) it contradicts his argument.
prk166:
Atlanta and Houston do not really offer attractive scenery amenities. There is a criteria for what is beautiful in landscapes done by the forest service/national parks. One of them being topographic change, which many of the lower cost cities are lacking. Virtually all of the west coast cities are in a very scenic area with topographic diversity.
I never said</b Atlanta and Houston were not attractive, in fact I said that they were but for different reasons. I said: “No offense, but Atlanta is not really that attractive design wise or geographically, neither is Dallas or Houston. That is not why those cities are attractive to new people, anyways.” (meaning they are attractive to people for other reasons than nice scenery like a lower cost of living, etc.).
This alone (good scenery) adds a reasonable price to housing, something that has not been discussed. Randall seems to think every city is in the same place without these variables.
*edit:
Atlanta and Houston do not really offer attractive scenery amenities. There is a criteria for what is beautiful in landscapes done by the forest service/national parks. One of them being topographic change, which many of the lower cost cities are lacking. Virtually all of the west coast cities are in a very scenic area with topographic diversity.
I never said Atlanta and Houston were not attractive, in fact I said that they were but for different reasons. I said: “No offense, but Atlanta is not really that attractive design wise or geographically, neither is Dallas or Houston. That is not why those cities are attractive to new people, anyways.†(meaning they are attractive to people for other reasons than nice scenery like a lower cost of living, etc.).
This alone (good scenery) adds a reasonable price to housing, something that has not been discussed. Randall seems to think every city is in the same place without these variables.
prk166: “That being the case, the house as an asset in a supply constrained market would not be overvalued if its price was increasing on account of that limited supply. Consequently, no bubble”
ws: Very nice insight, I never thought of it in those terms. I glanced through ROT’s preview and the definition of a bubble is growing by 45% and declining by 5% since the housing crash. I don’t know why this is the definition for a bubble.
Also lacking in ROT’s assertions are actual housing supply available on the market. Portland, Vegas, Phoenix are not lacking in supply of housing (single-family to multi-family). In fact, there’s too much on the market already. I see no thorough analysis that shows these cities and their respective availability of housing units.
SF, NY, etc. on the other hand are very geographically constrained and would benefit from more housing. Their price increases are induced from a more limited supply.
The bubble, meaning a high increase in housing prices, occurred mainly in about 15 markets, because of a mis-match in supply & demand.
Those markets had excessive restrictions & regulations that hindered the builders from keeping up with demand. There is much evidence. Look at the housing vacancy; it’s low, mostly below 5%, compared to the national average of about 9%.
Also, just think about the prices. If builders could make more money w/the higher prices, more would be built. But it’s much more difficult.
Many cities in CA, OR & other places, have the selfish drawbridge principle: “I’m here, the hell with newcomers, limit & discourage them.” That has shown, with CA having net negative domestic migration (2M+ this decade). Although, many immigrants move there, which is strange, because they choose the most expensive & most regulated state.
Many markets had high demand & high population growth, without rapid increase in housing prices, because builders could keep up. The large markets without high housing prices also grew considerably more.
If this bubbly was mostly due to the lax lending standards dictated by Congress, the price increases would be fairly uniform across the nation.
Evidence?
I collected some data from the Census.
The top chart has UAs with housing prices over $300,000.
The population growth in those UAs was 5%, while the national rate was 8%
(This chart was lined after typing, but might be jagged after submitting.)
Most expensive 12 Large Markets
change 2007 Urban 2006
since Pop. Area value
2000 mill. (not metro) thous.
6% 1.6 San Jose $745
12% 3.3 San Fran $721
3% 12.2 LA $608
4% 0.7 Honolulu $552
3% 2.7 San Diego $547
2% 0.9 Bridgeport $477
7% 4.2 DC $472
3% 18.4 NYC $468
8% 4.1 Boston $403
3% 1.8 Riverside $392
8% 2.9 Seattle $382
7% 1.5 Sacramento $376
2% 5.2 Miami $307
5% 5 mean $496
The next chart has UAs the fastest growing large markets, with housing under $300k. The average growth there was double (10%) the above cities.
change 2007 Urban 2006
since Pop. Area value
2000 mill. (not metro) thous.
8% 0.6 Fresno $299
8% 1.5 Las Vegas $298
9% 3.3 Phoenix $248
9% 1.4 Virg Beach $237
9% 0.6 Allentown $205
10% 0.8 New Orleans $181
11% 0.7 Birmingham $150
11% 4.6 Dallas $138
12% 0.6 Omaha $137
9% 4.4 Houston $134
8% 0.7 Rochester $124
9% 1.7 Pittsburgh $118
12% 0.6 McAllen $70
10% 1.7 mean $180
It can be clear that demand did not fuel high prices.
To see regs slowed demand, further study will show that.
Also, low vacancy rates are correlated, which show how supply is not meeting demand.
Notable too is the fact that that more expensive have larger populations–that’s when more growth limits usually kick in, along with more congestion.
Repeal of Glass-Stigall and other key regulations as well as no one scrutinizing CDOs and other such scam instruments caused the bubble, as anyone who can speak to the issue knows. And as I’ve said here before.
But it is important to repeat blatant falsehoods over and over, in hopes they become truth by repetition.
DS
Scott:“It can be clear that demand did not fuel high prices.”
ws:NYC, from 2000 – 2006 grew only 3% — yet they added 200,000+ people in that time span. Percentage growth often times is a misleading statistic.
“If this bubbly was mostly due to the lax lending standards dictated by Congress, the price increases would be fairly uniform across the nation.”–scott
Rarely in life is there a silver bullet. The feds policy of cheap money to try to avoid dealing with the damage of the tech bubble wasn’t a cause…. it was a catalyst. While I don’t doubt that supply constrictions have had an affect, I wouldn’t claim that that lack of uniformity proves much of anything. A pricing bubble like the housing bubble is a result of thousands of decisions by millions of individuals. It’s hard to imagine how just one type of supply constraint could be more than one of many reasons for the pricing bubble.
But it’s not correct to say that without smart growth rules, the growth in pricing would’ve been uniform across the country. It’s not just because, as others have pointed out, there are all sorts of flavors of “smart growth”. There are other issues. There are all sort of regulations and laws that affect supply and demand. California long ago screwed themselves in setting up tax incentives that encourage municipalities to avoid residential building in favor of commercial.
We also saw housing price increases of 20-40% in places like Fargo, North Dakota which wasn’t growing especially fast and where housing restrictions are few and far between. Other places that have all sorts of smart growth rules going on didn’t see much of any of run up.
But for such an asset bubble to occur, it’s going to build off it itself. That is, the guy who just made $4k by selling his spot in that new condo project going up after only holding onto the spot for 3 weeks, then goes out and and bids up buying a different spot in some other project… but that they’re likely to do this in the same market. They’re unlikely to go out and do the same thing in Oklahoma City or Des Moines because that’s not where they just made that money. They just made it in Miami (or LA or Las Vegas or…) so they’re going to try doing it that way again. It’s a similar psychology to one in stocks where an individual that owns a stock that’s they’ve made money off of (mind you, only on paper) has a hard time selling it even once the stocks lost it’s luster. It’s gone up so surely it’s going to go up again. Now housing is a different asset than stocks but humans are humans so the social and psychological aspects are similar.
Because of things like this, a bubble in an asset like housing is likely to become much more pronounced in specific metro areas because of it’s very nature. I wouldn’t say it proves much of anything other than humans are quirky creatures.
“:Repeal of Glass-Stigall and other key regulations as well as no one scrutinizing CDOs and other such scam instruments caused the bubble, as anyone who can speak to the issue knows.” — Dan
The problems with the Glass-Stigall claims are numerous. The first is that there have been all sorts of asset bubbles that have occured while Glass-Stigall has been in place. Housing had one in the late 70s and another in the late 80s. The most recent housing bubble started years before G-S was finally repealed in 2000. There were all sorts of loopholes in place for decades before that for some industry players. Other provisions of G-S were dropped decades ago. Furthermore there are other countries that have never had such regulations and have faired well enough without them.
There were plenty of people scrutinizing CDOs. The amount of data that investors alone demand in regards to a pool of assets is mind boggling. There are also all sorts of financial regulations let alone legal matters governing them. There are far, far, far from having no one scrutinizing them. Furthermore CDOs have been around for decades without these sort of issues as we’ve seen today. More so, in the world of CDOs, why did we see such huge probems with Mortgage Backed Bonds? Why didn’t we see the same issues with other CDOs back by assets such as Asset Backed Bonds (car loans, boat loans, etc)?
More so, how is it possible for a bubble to occur without a large expansion of the money supply?
Randal has again produced a great report. Some of the commentors should read it again. There is a lot to it but from San Jose/Silicon Valley it is right on.
Many in the last two years lost half of our net worth.
Minor note, but it exemplifies Randal’s indifference to research: he claims we are in an oil bubble. Nevermind he doesn’t define bubble, but he’s just parroting the internet echo chamber. The Commodity Futures Trading Commission released the report on Crude Oil which concludes the prices tracked changes in fundamental factors. That is: oil ain’t a bubble.
I find it confusing that a free marketer is so quick to shout bubble. The use of the word is pejorative and implies a desire to regulate speculative activity.
prk, my former career was in the banking industry as an analyst.
If I may, you are not completely and utterly wrong, but within sight of it. Sorry.
DS
So Dan, I take it that you’d rather not explain exactly how other countries that didn’t have Glass-Stigall type rules and regulations did not have these issues nor that you’d care to explain how Glass-Stigall could be the silver bullet behind the housing bubble despite it starting years before Glass-Stigall repeal. Is that correct, you’d rather not share those details?
No, prk, the fact is that the deregulation and lack of enforcement allowed banks to play with insurance and investments outside their previous purview, starting in large measure with the repeal of GS and culminating in the big sh– pile of CDOs that no one wanted to trade. Sorry to break it to you that regulation prevents companies from acting bad.
DS
Dan, what banks were doing was pretty much fraud. Loan sharks are more honest.
Dan, just curious what more there was to back up those “facts”. I don’t mean to place the onus on you of writing the stuff from scratch. Any good links? I’m curious because you keep mentioning CDOs when, and it’s been awhile since I’ve worked in the area, the problems with he huge bubble in the market seem limited to mortgage backed bonds. That’s not to say that certain regulations could have prevented this. But the question is, exactly what could be done? And to get there one needs to see exactly what went wrong not only in the US but in other countries. For example, if a lack of regulation is an issue in and of itself why did some Swedish banks nearly go under because of how deeply they jumped in the huge Baltic bubble while others didn’t and are actually thriving in today’s market.