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These policies distorted investment decisions and fed the bubble.
The largely unregulated, multitrillion-dollar market in derivatives fed the bubble, intensified the bust and led to the bailouts.
Dean Baker, an economist in Washington who has been arguing for the last five years that houses were overvalued, said the idea that house prices could go only up had fed the bubble.
In addition, the companies have been poorly supervised — by lawmakers who put a higher value on campaign contributions than on their duties, and by federal regulators who failed to stop the bad lending that fed the bubble.
For instance, Mr. Geithner called for all large hedge funds and private equity firms to register with the Securities and Exchange Commission, a move that could bring much-needed disclosure and oversight to vast pools of capital that fed the bubble economy.
Similar(53)
Pressure to make more money, increase shareholder value, and feed the bubble is part of the explanation.
Those still hanging on to underwater homes deserve at least as much help as the banks that profited by feeding the bubble.
Shiller contends that it is possible that the government and its regulators were excessively focused on preventing recession and deflation because they honestly saw the home price increases as continuing -- if at a reduced rate -- indefinitely, even if they were to implement a monetary policy that would feed the bubble (p. 48).
Derivatives, he said, added leverage to the system and fed the housing bubble before the crisis.
It's possible that it would have occurred had rates not been kept low, but in any case, Bernanke must be regarded as one of the intellectual authors of the low-rate policy that fed the housing bubble.
The private testimony, released recently by the government panel responsible for rooting out the causes of the crisis, depicts an emboldened former chief executive, defiant in the face of criticism that his company fed the mortgage bubble.
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