[quote=markmax33][quote=SK in CV][quote=markmax33]The $250,000 tax credit was certainly part of it, but if the private market had to own the mortgages and didn’t have the GOV to compete with and lead the way on MBS and encourage MBS’s through the GSEs, this wouldn’t have happened on this scale if at all. If interest rates could have floated up, instead of the FED slashing them and encouraging bad investing the $250,000 credit would have been a non-issue. I believe the second the $250,000 tax credit was issued that a flood of investors would have been trying to get credit and rates would have adjusted upward, thus stabalizing the market and balancing out the risk with the tax credit.[/quote]
Just to clarify, there was never a $250,000 tax credit. It’s a $250,000 exclusion. ($500,000 for a married couple.) And it replaced an unlimited exclusion for move-up sellers. And it happened way back in 1997. And it doesn’t and never did apply to investment property, only to primary residences. And beginning in june of 2004 and the end of 2006, the federal funds rate and the discount rate were raised 17 times.[/quote]
Are you implying that 17 times was enough and equal to what a normal market would have done in that period of time? Do you think the 12 idiots at the FED did the right thing? I offer you that a market works like a spring and that the artifically low rates in the early 2000s created a momentum that couldn’t be stopped in a reasonable amount of time by the 12 idiots at the FED. I offer you that the housing bubble would have stopped as soon as it started because a floating interest rate would be adjusting for risk instantaneously because that’s how markets work efficiently.[/quote]
No, I’m implying no such thing. See the bolded part of your comment. I’ll repeat it here. “If interest rates could have floated up, instead of the FED slashing them…” I wasn’t implying anything, just telling you that the fed did almost exactly as you suggested. They floated interest rates up over a 30 month period.
In hindsight, I think they should have jacked them up more and faster and earlier. I think congress should have acted. I think the Treasury department should have. I think the FDIC should have. I think the SEC should have. I think the GSE’s should never have tried to compete with the private money, there was no shortage of willing lenders and investors. I think the Attorney General of New York should have acted (and still should). I think the IRS should have acted. And probably 1/2 a dozen more federal agencies who had some jurisdiction and maybe every single state AG. But if I had said that before, it wouldn’t have been the least bit responsive to your comment.
