4 ms·

Alright I'm sympathetic and also think fuck the banks but really how did TARP cause thr current housing crisis?

tim333 3y ago
I think the argument is 0% interest rates caused the housing crisis, not TARP.
pas 3y ago
https://www.fullstackeconomics.com/p/the-2000s-housing-bubble-was-greatly-exaggerated https://www.fullstackeconomics.com/p/the-2000s-housing-bubbl...
- no_wizard 3y ago
  I buy that if you look at today's housing issues and trace it back, it would make sense that we never ramped housing construction back up, but this article glosses over many systematic issues that existed back then and today. For example, the author notes: >To me, the strongest piece of evidence in favor of the recession causing the housing crisis rather than the housing crisis causing the recession is the fact that prices snapped back up, in similar geographic configuration, after the economy has recovered This is unsurprising, its where all the good paying jobs still are. The centers of employment as it were, are in the areas with the most housing demand, and spillover from that will drive adjacent markets up as people at the top and wanting to move sell and move to LCOL areas. Fundamentally this is the issue with housing that I think is readily apparent to anyone who has looked at the market with any seriousness. Now with w/r/t 2008 it was faulty mortgages and mortgage backed securities that caused the recession, not housing construction. That is accurate to say, if you want to paint in broad strokes, but the defaults on NINJA loans and variable mortgages leads to a depression in home buying as credit tightens up and losses mount. I don't see how you don't end up with some depression in the housing market as a result of this, even if its uneven in whom it affects. Alot of collateral is tied up in real estate and that assumes "up and to the right" value of real estate holds constant. You have to square that too. In the US, real estate is in a tug of war between being two views: One is as an investment vehicle / asset. The other is as a commodity to which we all need to live because its required for housing. Those two don't square very well. One thing is for sure, homeowners want the value of their home to appreciate, and they fight tooth and nail to make sure it does. I think in context, we as a society over-invested in "real estate is an asset and can be your nest egg cause they ain't making more!" type narratives, and would do well if we shifted toward "real estate is only as valuable as it is used productively for society"[0] [0]: In reference to Georgism: https://en.wikipedia.org/wiki/Georgism https://en.wikipedia.org/wiki/Georgism
  - pas 3y ago
    > I don't see how you don't end up with some depression in the housing market as a result of this, even if its uneven in whom it affects. I don't think that's inconsistent with "the Fed has overreacted, and should have kept rates low/lower". It just means that probably more people would have been able to make the monthly payments, the depression would have been smaller. And of course your implicit point is that letting too many bad loans fester could have (would have) cratered a sizeable portion of the financial system anyway. But instead of treating this as an asset bubble we ended up with an understimulated recession. (It's completely ridiculous that US real estate with a growing population was seen as 'toxic assets' even by the government. Just put it on the balance sheet of some random agency and sell it later, when convenient. Or use it as social housing, whatever. But of course ... politics emerges from culture.)

I think the argument is 0% interest rates caused the housing crisis, not TARP.

pas 3y ago

https://www.fullstackeconomics.com/p/the-2000s-housing-bubble-was-greatly-exaggerated https://www.fullstackeconomics.com/p/the-2000s-housing-bubbl...

no_wizard 3y ago
I buy that if you look at today's housing issues and trace it back, it would make sense that we never ramped housing construction back up, but this article glosses over many systematic issues that existed back then and today. For example, the author notes: >To me, the strongest piece of evidence in favor of the recession causing the housing crisis rather than the housing crisis causing the recession is the fact that prices snapped back up, in similar geographic configuration, after the economy has recovered This is unsurprising, its where all the good paying jobs still are. The centers of employment as it were, are in the areas with the most housing demand, and spillover from that will drive adjacent markets up as people at the top and wanting to move sell and move to LCOL areas. Fundamentally this is the issue with housing that I think is readily apparent to anyone who has looked at the market with any seriousness. Now with w/r/t 2008 it was faulty mortgages and mortgage backed securities that caused the recession, not housing construction. That is accurate to say, if you want to paint in broad strokes, but the defaults on NINJA loans and variable mortgages leads to a depression in home buying as credit tightens up and losses mount. I don't see how you don't end up with some depression in the housing market as a result of this, even if its uneven in whom it affects. Alot of collateral is tied up in real estate and that assumes "up and to the right" value of real estate holds constant. You have to square that too. In the US, real estate is in a tug of war between being two views: One is as an investment vehicle / asset. The other is as a commodity to which we all need to live because its required for housing. Those two don't square very well. One thing is for sure, homeowners want the value of their home to appreciate, and they fight tooth and nail to make sure it does. I think in context, we as a society over-invested in "real estate is an asset and can be your nest egg cause they ain't making more!" type narratives, and would do well if we shifted toward "real estate is only as valuable as it is used productively for society"[0] [0]: In reference to Georgism: https://en.wikipedia.org/wiki/Georgism https://en.wikipedia.org/wiki/Georgism
- pas 3y ago
  > I don't see how you don't end up with some depression in the housing market as a result of this, even if its uneven in whom it affects. I don't think that's inconsistent with "the Fed has overreacted, and should have kept rates low/lower". It just means that probably more people would have been able to make the monthly payments, the depression would have been smaller. And of course your implicit point is that letting too many bad loans fester could have (would have) cratered a sizeable portion of the financial system anyway. But instead of treating this as an asset bubble we ended up with an understimulated recession. (It's completely ridiculous that US real estate with a growing population was seen as 'toxic assets' even by the government. Just put it on the balance sheet of some random agency and sell it later, when convenient. Or use it as social housing, whatever. But of course ... politics emerges from culture.)