Nick wrote:
>I see that as a market failure that should have been prevented via >regulation (or, more correctly, enabled via deregulation). First, I'm sorry you are stuck in a bad situation. That's sucks. But, I'm curious as to how the deregulation caused the real estate bubble. Now one could argue that it made it worse, since banks packaged sub-prime mortgages, did smoke and mirrors, and sold it as solid investments. But, the problem with the Risk Assessment model was not a regulation problem, the banks just wouldn't believe that national housing prices could fall more than 10% because the odds were, historically, <2%...which the Risk Assessment Model rounded to zero. But, given the fact that California deliberately kept housing prices up by making it near impossible to build affordable houses, and given the tax laws that works like NYC rent control, there were stronger reasons for the housing market to be artificially built up. Add to that low interest rates, a recent Wall Street bubble burst, and money looking for a place to go, property was an obvious candidate for a bubble. It's _always_ a good investment, everybody knows it. The last time average values of property went down appreciably in the US was 90 years ago. So, let's assume that the government was doing its job right, requiring proper reserves for investment banks, and requiring banks to disclose what was in their bundled offerings. That would only take care of the sub-prime part of the mess. But, the overwhelming majority of people presently under water are not sub-prime borrowers. Even with regulations, I went through two local housing slumps, the second of which put me well under water. I escaped, but lots of folks saw their house values go down 25%-50% in the oil bust, when Houston went into a near depression....and the small recession of '91-'92 was enough to drop Conn. prices 25% in a year. So, it happened with regulation, and was bound to happen with California. But, unless you go to a planned economy, I'm not sure how you eliminate the inherent risk of bubbles in a market. Dan M. _______________________________________________ http://box535.bluehost.com/mailman/listinfo/brin-l_mccmedia.com
