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August 31, 2007
Ben Bernanke's Money Sentences
Here are the two "money" sentences from Fed chair Ben Bernanke's Jackson Hole speech today on housing:- The Federal Reserve stands ready to take additional actions as needed to provide liquidity and promote the orderly functioning of markets.
- It is not the responsibility of the Federal Reserve--nor would it be
appropriate--to protect lenders and investors from the consequences of
their financial decisions.
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Personally, I think this is great news. Why on earth should the government bail out someone like the guy you quoted earlier today from Jersey who bought two houses in Florida? Talk about moral hazard problems. It's a shame Bush didn't learn the same lesson viz. his extending FHA loan protection to some subprime loans.
In any event, the true beneficiaries of any bail-out aren't likely to be homeowners; most of them didn't have great credit anyway, got to live in a big house for a few years, and aren't going to lose their job (unless they worked for AHM or HomeBanc) - they'll just rent somewhere for a while. The real beneficiaries would have been the Countrywides and Bear Stearnses of the world -- I, for one, am not too worried about them.