Bruce Judson — The Foreclosure Crisis: A Government in Denial

The Federal Reserve sent a warning shot that housing is the greatest threat to the economy. The government should take note.

Read it at New Deal 2.0
The Foreclosure Crisis: A Government in Denial

by Bruce Judson
Entrepreneur-in-Residence at the Yale Entrepreneurial Institute and a former Senior Faculty Fellow at the Yale School of Management.

...This memo is notable for several reasons. First, it’s important to remember that when the Fed speaks, it does so in sober, limited terms. So an unprompted Fed warning suggesting “a persistent excess of supply” and a “resultant drag on the economy” is comparable to the Secretary of Homeland Security holding a press conference to warn of the risk of an imminent national emergency. Second, an unprompted memo from Bernanke to the House means that he is so deeply worried he felt the need to speak out in as strong a voice as his position permits. Third, the Fed rarely speaks on issues unrelated to its direct activities. Indeed, The Wall Street Journal subsequently wrote, “For an institution that jealously guards its independence, the Federal Reserve is wading into treacherous political waters.”

Finally, co-ordinated speeches by three top Fed officials further indicate the depth of the Fed’s concerns....

Bruce articulates the data underlying gaius marius's claim that this is a depression.

And the looming risk is debt-deflation.