Regional President Speech

Conference on “Understanding the Housing Collapse: What is to Blame and What Can Be Done?” Eric S. Rosengren President & CEO Federal Reserve Bank of Boston May 5, 2010 www.bos.frb.org Figure 1 Japanese Land Price Index for Six Major Cities March 1975 -March 2009 Index, March 2000 = 100 300 250 Six Major Cities 200 150 100 50 0 Mar-1975 Mar-1979 Mar-1983 Mar-1987 Mar-1991 Mar-1995 Mar-1999 Mar-2003 Mar-2007 Source: Japan Real Estate Institute 2 Figure 2 Japan’s Core Consumer Price Index March 1987 - March 2010 Percent Change from Year Earlier 4.0 3.0 2.0 1.0 0.0 -1.0 -2.0 Mar-1987 Mar-1990 Mar-1993 Mar-1996 Mar-1999 Mar-2002 Mar-2005 Mar-2008 Source: Japan’s Ministry of Internal Affairs and Communications / Haver Analytics 3 Figure 3 U.S. Home Price Index: S&P/Case-Shiller National Index March 1990 - December 2009 Index, March 2000 = 100 200 160 S&P/Case-Shiller NationalIndex 120 80 40 0 Mar-1990 Mar-1993 Mar-1996 Mar-1999 Mar-2002 Mar-2005 Mar-2008 Source: S&P/Case-Shiller / Haver Analytics 4 Figure 4 U.S. Unemployment Rate January 1959 - March 2010 Percent,Seasonally Adjusted 12 1 10 1 8 1 6 0 4 0 2 0 0 Jan-1959 Jan-1967 Jan-1975 Jan-1983 Jan-1991 Jan-1999 Jan-2007 Recession Source: BLS, NBER / Haver Analytics 5 Policy Questions (cid:131) How important are short-term interest rates set by monetary policy for starting or stopping real estate bubbles? (cid:131) How important is financial innovation (e.g., subprime loans, securitization) in creating real estate bubbles? (cid:131) Would different supervisory or tax policies have been effective in preventing a boom/bust cycle in real estate? 6 More Questions (cid:131) How do we better quantify the indirect effects of falling real estate prices? How do falling real estate values influence (cid:137) consumers? What is the broader impact of leveraged (cid:137) institutions taking real estate losses? (cid:131) How can macroeconomic models capture the full effect of falling real estate prices? 7 More Questions (cid:131) Tighter underwriting standards may reduce foreclosures but limit availability of financing for low- and moderate-income buyers. How should policy make the trade-offs? (cid:131) How important were nonstandard fiscal policies (e.g., home buyer credits) and monetary policies (e.g., purchases of MBS) in stabilizing home prices? 8 More Questions (cid:131) What are the appropriate roles for Freddie and Fannie in housing policies? (cid:131) What is the appropriate role for FHA? (cid:131) What have we learned about foreclosure mitigation that can help prevent future problems? (cid:131) How did some countries, such as Canada, avoid housing problems? 9 Important Role of Research (cid:131) Policymakers have many questions; hopefully, this conference will lead to some answers. (cid:131) Disseminating and implementing research findings are as important as doing the basic research. 10

Eric Rosengren (2010, May 4). Regional President Speech. Speeches, Federal Reserve. https://whenthefedspeaks.com/doc/regional_speeche_20100505_eric_rosengren

@misc{wtfs_regional_speeche_20100505_eric_rosengren,
  author = {Eric Rosengren},
  title = {Regional President Speech},
  year = {2010},
  month = {May},
  howpublished = {Speeches, Federal Reserve},
  url = {https://whenthefedspeaks.com/doc/regional_speeche_20100505_eric_rosengren},
  note = {Retrieved via When the Fed Speaks corpus}
}