FDIC Chairman Sheila Bair delivers a keynote address on the issue of foreclosures and the future of housing finance at a joint Federal Reserve/FDIC conference in Arlington, Va:
This moring the Case Shiller Index for August confirmed that Home Prices in 20 U.S. Cities Rose Less Than Forecast. The next down-leg in housing is now underway: demand is not resuming and supply on the sidelines remains very heavy. Persistent unemployment, decimated credit scores, and the next wave of the foreclosure fiasco are all likely to work housing prices lower over the next year or two.
The correct role of government policy is preventative rules and regulation. Efforts to bail out the housing bubble and its aftermath have been ineffective and wasteful of the public purse. Moreover they represent a disheartening lack of understanding on the part of governments and flawed institutions trying to reinforce the status quo rather than admit mistakes and effect meaningful reform. This is what happened in Japan over the past 22 years. It won’t end well in North America either.
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