Best of the Week
Most Popular
1. US Housing Market House Prices Bull Market Trend Current State - Nadeem_Walayat
2.Gold and Silver End of Week Technical, CoT and Fundamental Status - Gary_Tanashian
3.Stock Market Dow Trend Forecast - April Update - Nadeem_Walayat
4.When Will the Stock Market’s Rally Stop? - Troy_Bombardia
5.Russia and China Intend to Drain the West of Its Gold - MoneyMetals
6.BAIDU (BIDU) - Top 10 Artificial Intelligence Stocks Investing To Profit from AI Mega-trend - Nadeem_Walayat
7.Stop Feeding the Chinese Empire - ‘Belt and Road’ Trojan Horse - Richard_Mills
8.Stock Market US China Trade War Panic! Trend Forecast May 2019 Update - Nadeem_Walayat
9.US China Trade Impasse Threatens US Lithium, Rare Earth Imports - Richard_Mills
10.How to Invest in AI Stocks to Profit from the Machine Intelligence Mega-trend - Nadeem_Walayat
Last 7 days
Why are Central Banks Buying Gold and Dumping Dollars? - 23rd June 19
Financial Sector Paints A Clear Picture For Stock Market Trading Profits - 23rd June 19
What You Should Look While Choosing Online Casino - 23rd June 19
INTEL (INTC) Stock Investing to Profit From AI Machine Learning Boom - 22nd June 19
Here’s Why You Should Drive a Piece of Crap Car - 22nd June 19
How Do Stock Prices React to Fed Interest Rate Cuts? - 22nd June 19
Gold Bull Market Breaking Out! - 21st June 19
Post-FOMC Commentary: Delusions of Grandeur - 21st June 19
Gold Scores Gains as Draghi and Powel Grow Concerned - 21st June 19
Potential Upside Targets for Gold Stocks - 21st June 19
Gold Price Trend Forcast to End September 2019 - 21st June 19
The Gold (and Silver) Volcano Is Ready to Erupt - 21st June 19
Fed Leaves Rates Unchanged – Gold & Stocks Rally/Dollar Falls - 21st June 19
Silver Medium-Term Trend Analysis - 20th June 19
Gold Mining Stocks Waiting on This Chart - 20th June 19
A Key Gold Bull Market Signal - 20th June 19
Money Saving Kids Gardening Growing Giant Sunflowers Summer Fun - 20th June 19
Investing in APPLE (AAPL) to Profit From AI Machine Learning Stocks - 20th June 19
Small Cap Stocks May Lead A Market Rally - 20th June 19 -
Interest Rates Square Minus Zero - 20th June 19
Advice for Financing a Luxury Vehicle - 20th June 19
Stock Market Final Blow Off Top Just Hit… Next Week Comes the FIREWORKS - 20th June 19
US Dollar Rallies Off Support But Is This A Top Or Bottom? - 19th June 19
Most Income Investors Are Picking Up Nickels in Front of a Steamroller - 19th June 19
Is the Stock Market’s Volatility About to Spike? - 19th June 19
Facebook's Libra Crypto currency vs Bitcoin: Five Key Differences - 19th June 19
Fed May Trigger Wild Swing In Stock Index and Precious Metals - 19th June 19
How Long Do Land Rover Discovery Sport Brake Pads Last? - 19th June 19
Gold Golden 'Moment of Truth' Is Upon Us: $1,400-Plus or Not? - 18th June 19
Exceptional Times for Gold Warrant Special Attention - 18th June 19
The Stock Market Has Gone Nowhere and Volume is Low. What’s Next - 18th June 19
Silver Long-Term Trend Analysis - 18th June 19
IBM - Watson Deep Learning - AI Stocks Investing - Video - 18th June 19
Investors are Confident, Bullish and Buying Stocks, but… - 18th June 19
Gold and Silver Reversals – Impossible Not to Notice - 18th June 19
S&P 500 Stuck at 2,900, Still No Clear Direction - 17th June 19
Is Boris set to be the next Conservation leader? - 17th June 19
Clock’s Ticking on Your Chance to Profit from the Yield Curve Inversion - 17th June 19
Stock Market Rally Faltering? - 17th June 19
Johnson Vs Gove Tory Leadership Contest Grudge Match Betfair Betting - 17th June 19
Nasdaq Stock Index Prediction System Is Telling Us A Very Different Story - 17th June 19
King Dollar Rides Higher Creating Pressures On Foreign Economies - 17th June 19
Land Rover Discovery Sport Tailgate Not Working Problems Fix (70) - 17th June 19
Stock Market Outlook: is the S&P today just like 2007 or 2016? - 17th June 19
US China War - Thucydides Trap and gold - 16th June 19
Gold Stocks Bull Upleg Mounting - 16th June 19
Gold Price Seasonal Trend Analysis - Video - 16th June 19
Fethiye Market Fruit, Veg, Spices and Turkish Delight Tourist Shopping - 16th June 19
US Dollar Gold Trend Analysis - 15th June 19
Gold Stocks “Launch” is in Line With Fundamentals - 15th June 19
The Rise of Silver and Major Economic Decline - 15th June 19
Fire Insurance Claims: What Are the Things a Fire Claim Adjuster Does? - 15th June 19
How To Find A Trustworthy Casino? - 15th June 19
Boris Johnson Vs Michael Gove Tory Leadership Grudge Match - Video - 14th June 19
Gold and Silver, Precious Metals: T-Minus 3 Seconds To Liftoff! - 14th June 19
Silver Investing Trend Analysis - Video - 14th June 19
The American Dream Is Alive and Well - in China - 14th June 19
Keeping the Online Gaming Industry in Line - 14th June 19
How Acquisitions Affect Global Stocks - 14th June 19
Please Don’t Buy the Dip in Nvidia or Other Chip Stocks - 14th June 19
A Big Thing in Investor Education is Explainer Videos - 14th June 19
IRAN - The Next American War - 13th June 19
Boris Johnson Vs Michael Gove Tory Leadership Grudge Match Contest - 13th June 19
Top Best VPN Services You Can Choose For Your iPhone - 13th June 19
Tory Leadership Contest Betting Markets Forecast - Betfair - 13th June 19
US Stock Market Setting Up A Pennant Formation - 13th June 19
Which Stocks Will Lead The Cannabis Rebound? - 13th June 19

Market Oracle FREE Newsletter

Gold Price Trend Forecast Summer 2019

Glenn Hubbard Wannabe Fed Chairman Devises New Bailout Plan

Interest-Rates / Credit Crisis Bailouts Nov 11, 2008 - 07:32 AM GMT

By: Brady_Willett

Interest-Rates Although he didn't get the nomination to replace Greenspan, Columbia's Glenn Hubbard often comments on what he believes is the best path for policymakers to take. Yesterday Mr. Hubbard was at it again, offering a brief commentary on the Nightly Business Report:


“Policymakers should take action to blunt expected future declines in house prices…Consensus forecasts predict additional house price declines of 15 percent over the next 18 months. If we could lower mortgage interest rates by one percentage point, we could blunt this decline. And we can accomplish this change without costly new subsidies.”

Hubbard has devised a new bailout plan to stop housing prices from falling that won't cost that much - wonderful!.  Unfortunately this may not the case:

“…Financing mechanisms are available for the government to lower current borrowing costs for Fannie Mae and Freddie Mac and lower mortgage rates and raise house prices.” [bolds added]

Financing mechanisms are available to lower borrowing costs for Fannie and Freddie?  Isn't this akin to saying the government can lend money to itself more cheaply? Granted, it wouldn't take an entirely ‘new' bailout scheme to enact this type of plan, but isn't added taxpayer exposure to the already bailed out Freddie and Fannie potentially very ‘costly' Mr. Hubbard? 

As for Hubbard's assumption that lower mortgage rates raise house prices (recent activity in the U.S. housing market would suggest otherwise), in October Hubbard said “The price of a home is partially dependent on the mortgage rate” and “Rising mortgage spreads and down-payment requirements are what's still driving down housing prices.” In other words, Hubbard believes that lowering mortgage rates/spreads and loosening down-payment requirements could help ‘blunt' the decline in housing prices.  Also from October, Hubbard said that government endorsed mortgages “would be backed by houses and the verified ability to repay the debt by millions of Americans” , and that for borrowers with lower credit scores, the mortgage rate would be greater [ than Hubbard's prescribed rate].”  Apparently since these details infringed upon the optimistic noise Hubbard wanted to espouse on NBR they were not mentioned.

Suffice to say, Hubbard is reticent to acknowledge that falling mortgage rates are not a panacea.  He is also myopically ignoring common sense when he says that his “plan could offer a $100 billion annual stimulus.” Where in the world did Hubbard pull this $100 billion figure from anyway? The answer, again, may come from his comments made back in October:

“So if home prices increased 10% above where they would have been without government intervention, we estimate consumers will have an additional $100 billion annually to spend.”

Remember, Mr. Hubbard is a well respected professor that almost became Chairman of Federal Reserve, not a crackpot. If you ignore the costs of a housing bailout consumers could have an $100 billion to spend if housing prices increase by 10%?  Baffling, to say the least.

There are real costs when trying to stop housing prices from falling Mr. Hubbard, and these costs are already threatening to build: Yesterday Fannie Mae reported a $29 billion loss for 3Q08 and warned that the government's $100 billion lifeline may not be enough, and Freddie Mac is expected to report terrible results later this week. In other words, while Hubbard's plan to further utilize the Fannie and Freddie bailout conduit is plausible but not without costs, financial losses lead to the creeping possibility that more taxpayer funds will be required to simply keep these conduits solvent in the future.  Imagine Hubbard as a chef preparing his secret recipe, all the while unsure if his oven is about to blow-up.

November 10, 2008: http://www.pbs.org/nbr/site/onair/transcripts/081110c/
October 2, 2008: First, Let's Stabilize Home Prices Hubbard

By Brady Willett
FallStreet.com

FallStreet.com was launched in January of 2000 with the mandate of providing an alternative opinion on the U.S. equity markets.  In the context of an uncritical herd euphoria that characterizes the mainstream media, Fallstreet strives to provide investors with the information they need to make informed investment decisions. To that end, we provide a clearinghouse for bearish and value-oriented investment information, independent research, and an investment newsletter containing specific company selections.

Brady Willett Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules