"Every doctor knows the fastest way to stabilize a patient is to kill them, because there is nothing more stable than death. While that solution may be fast and inexpensive it’s also sub-optimal. Yet pundits repeatedly posit the fastest way to end the housing crisis is through mass foreclosures. In a strict sense they’re right, that will achieve stability, though so will other policies calibrated to cause less micro and macroeconomic damage .. and a lot less human suffering.
Honest economists explain their reasoning, which is that there is a need to find a market bottom. They argue that in a healthy market sellers should not compete with REO properties and buyers need not worry an oncoming glut of foreclosures will drive down the value of their house. These economists, who remain in the minority, usually preface this is a lousy solution albeit the only one they can think of.
More common are bankers and economists who paint a rosy picture at the notion of throwing millions of families to the street, and millions of homes to the market.
“Once distressed inventory comes down and all of a sudden there’s not enough homes, you’re going to have a real bounce,” said JP Morgan Chase CEO Jamie Dimon in a recent interview.
Dimon surely knows the 2010 Census reports 131.8 million residential housing units for 312.9 million people, including about 17 million empties, so I’m not sure where his housing shortage comes from.
Dimon’s bank is sitting on a powder-keg of $87.6 billion of mostly worthless second mortgages at the end of Q3, 2011, according to the FDIC, so I can see why he’s playing cheerleader for a housing renaissance. But treating people like chumps, by encouraging them to buy in this broken market, crosses the line from puerile to patronizing.
If Dimon’s bank is genuinely bullish on housing then let them show it by dramatically ratcheting up their non-GSE lending. It will be interesting to see how JPM investors react to what I’m sure will be Dimon’s forthcoming announcement that JP Morgan Chase plans to lower credit-standards, increase private mortgage lending, and retain the loans on their own balance sheet.
Every argument housing cheerleaders advance is easily debunked..."
at http://www.nakedcapitalism.com/2012/02/michael-olenick-shocking-economic-insight-%e2%80%93%c2%a0mass-foreclosures-will-drive-down-home-prices.html
Honest economists explain their reasoning, which is that there is a need to find a market bottom. They argue that in a healthy market sellers should not compete with REO properties and buyers need not worry an oncoming glut of foreclosures will drive down the value of their house. These economists, who remain in the minority, usually preface this is a lousy solution albeit the only one they can think of.
More common are bankers and economists who paint a rosy picture at the notion of throwing millions of families to the street, and millions of homes to the market.
“Once distressed inventory comes down and all of a sudden there’s not enough homes, you’re going to have a real bounce,” said JP Morgan Chase CEO Jamie Dimon in a recent interview.
Dimon surely knows the 2010 Census reports 131.8 million residential housing units for 312.9 million people, including about 17 million empties, so I’m not sure where his housing shortage comes from.
Dimon’s bank is sitting on a powder-keg of $87.6 billion of mostly worthless second mortgages at the end of Q3, 2011, according to the FDIC, so I can see why he’s playing cheerleader for a housing renaissance. But treating people like chumps, by encouraging them to buy in this broken market, crosses the line from puerile to patronizing.
If Dimon’s bank is genuinely bullish on housing then let them show it by dramatically ratcheting up their non-GSE lending. It will be interesting to see how JPM investors react to what I’m sure will be Dimon’s forthcoming announcement that JP Morgan Chase plans to lower credit-standards, increase private mortgage lending, and retain the loans on their own balance sheet.
Every argument housing cheerleaders advance is easily debunked..."
at http://www.nakedcapitalism.com/2012/02/michael-olenick-shocking-economic-insight-%e2%80%93%c2%a0mass-foreclosures-will-drive-down-home-prices.html
