Fed study says home price drop ‘necessary’

by Tom on July 7, 2008
in Market Musings

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Large-scale government intervention in the US housing crisis would be counterproductive and prevent a “necessary” correction in home prices, according to a Federal Reserve study released Monday.  The study by economist William Emmons of the St. Louis Fed concluded that “government interventions directly in housing or mortgage markets are not necessarily the best policy responses.”

So what does that mean?  Essentially, he’s saying that it’s not necessarily the best thing for the government to bailout the housing (or the mortgage) industry.   It might actually be harmful.

Remember that as you are talking to people who are in favor of Congress doing “something.”

It might be more painful in the short term, but healthier in the long run.

Call me if you’d like to talk about it.

Tom

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