The U.S. Foreclosure Crisis: A Two-Pronged Assault on the Economy

Tatom, John

The U.S. Foreclosure Crisis: A Two-Pronged Assault on the Economy

Chapter 6 in Financial Institutions and Markets, 2009, pp 131-154 from Palgrave Macmillan

Abstract: Abstract The foreclosure problem affects real economic activity and financial markets. The timing of developments in the housing market will limit how fast markets restore stability and growth. The Federal Reserve has complicated the problem by creating new lending programs that redirected its credit supply to private financial institutions and in the process violated the first rule of central banking to lend liberally in a liquidity crisis. This failure, compounded by providing a backstop to questionable securities, has slowed market adjustment and risks lengthening and deepening the crisis. This chapter reviews and evaluates the foreclosure crisis, its real impacts in the economy, the financial market effects of the surge in mortgage foreclosures, and the monetary policy response to the problem.

Keywords: Monetary Policy; Hedge Fund; Federal Fund Rate; Federal Housing Administration; Housing Start (search for similar items in EconPapers)
Date: 2009
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Working Paper: The U.S. Foreclosure Crisis: A Two-Pronged Assault on the U.S. Economy (2008)
Working Paper: The U.S. foreclosure crisis: a two-pronged assault on the U.S. economy (2008)
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DOI: 10.1057/9780230103245_6

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