Thread: How can Obama "Unburst" the Housing Bubble?

Here is a link to a paper that pre-dates the bursting of the housing bubble:

http://www.cepr.net/documents/public...ct_2005_07.pdf

Today I was listening to Rush Limbaugh on the Radio and he was going on an on about the economy and basically blaming the woes of the housing market on Obama. I will give Rush credit for being capable of creating talking points and now that he has spoken, it will be a common theme in the run-up to the election. I get it that inciting a mob is an effective strategy but is it realistic to expect Obama to un-burst the Housing Bubble?

Back when George W. Bush was president, you could buy a home with bad credit and not much money down. People who were not good credit risks and who didn't make enough money to pay it back were being loaned money. As far as North America, this was taking place primarily in the USA. In Canada, they didn't allow the risky loans and as a result they didn't have to fund a bank bailout. Since George W Bush was president at time this was going on, I don't see why his apologist supporters don't want him to get the credit he deserves.

The housing market was driven by bad loans. It created jobs and propped up the economy. Now that the house of cards has come tumbling down, it has created a huge inventory of foreclosures which are now empty. The housing market is driven by supply and demand. Now that there are so many empty houses, it doesn't make sense that there is going to be a strong market for new construction. The glut in supply is also going to drive prices down.

It may sound good on Republican bumper stickers but it is ignorant and stupid to think that the bursting of the housing bubble was a short term problem and it is just as ignorant to think that it was possible for any president to come in and fix it in two years. The right complains about bailouts but at the same time they seem to be promoting the idea of putting a band-aid on the problem and cranking up the sub-prime lending market. There is no other credible way to absorb the additional housing inventory so it doesn't wash.


Anybody who blames Obama for problems caused by the bursting of the housing bubble that happened under George W Bush's watch is either a liar, an idiot, or both.

It's just another Bush admin mess that they want to blame on the President. He certainly didn't create the problem.

Bluesman, you've raised a great issue and it's worthy of some detailed analysis. Maybe now that the neo+cons have quieted down a little, we can discuss this more meaningfully.

First thing, IMO you've talked about two issues, and they're separable.

The. economics of the housing bubble is a banking issue, it has nothing to do with Obama or Bush or Clinton, except insofar as the Executive Branch may have been "less than adequately zealous" with the regulation and oversight.

The politics oF the housing bubble though, has everything to do with Bush and Obama (and Clinton too), and very little to do with banking.

So which would you like to talk about? IMO it's more important that we discuss the economic piece, and that story by itself is sordid enough to keep us riveted to our terminals all night long.

Originally Posted by Cicero

...penalties they would suffer if they didn't make loans to people they KNEW couldn't pay those loans back.

They didn't know that at all. People could have paid back their loans if the economy had kept going. If we assume for the sake of discussion that the bankers weren't behind this and were just along for the ride like everyone else, then the major problem would seem to be over-confidence more than anything else.

The housing bubble "burst" because the risk profiles were inappropriate. The rating services (Moody's, standard and Poors) were recently exonerated of any wrong-doing in that regard. They just screwed up, is all.
The loans were government guaranteed and the did their best to male good on the guarantee. What this really was, was a crisis in confidence, and it's still going on.

What we really should be paying attention to is Gramm-Leach-Bliley and the concept that fund managers are taking positions in their own funds. Strange as it may sound, if banks were forbidden from buying back their own loans we wouldn't have half these problems!

Originally Posted by nonsqtr

First thing, IMO you've talked about two issues, and they're separable.

The. economics of the housing bubble is a banking issue, it has nothing to do with Obama or Bush or Clinton, except insofar as the Executive Branch may have been "less than adequately zealous" with the regulation and oversight.

The politics oF the housing bubble though, has everything to do with Bush and Obama (and Clinton too), and very little to do with banking.

So which would you like to talk about? IMO it's more important that we discuss the economic piece, and that story by itself is sordid enough to keep us riveted to our terminals all night long.

As far as blaming the president, I was just pointing out that if the president is going to be blamed, then it wouldn't make sense to single out Obama and give GWB a free pass. I was addressing a talking point that Rush Limbaugh was passing along yesterday.

As far as the economics of it, I don't claim to know all the answers but I am fairly certain that it is impossible to expect that when the bubble did burst that it was going to be a short term problem. The housing market ties in with the economy in so many ways: Yoiu have to figure that banks are no longer making money from loans but instead having to eat the bad loans; New home construction has come to a standstill and that takes away jobs and purchases of lumber; concrete, plumbing goods, electrical goods, etc., so it hits manufacturing also; The value of the single biggest investment/asset for many housholds is now gone and therefore consumer confidence suffers. These are just off the top of my head.

Housing is not only a big "indicator" when it comes to the economy, it is a huge factor in and of itself. I thought what was contained in the link I provided in the first post was interesting because it was dated 2005 and it was talking about how artificially inflated the value of housing was from 1995 through 2005.