The worst of capitalism: Fannie and Freddie

Should the Treasury bail out Fannie and Freddie?  A recent Economist article gives a level-headed solution: nationalize and then dismantle them. Most libertarians would say that Fannie and Freddie should fail.  Having these two giant players collapse, however, add dynamite to an already explosive mortgage finance market.  Thus, the short term solution must be to…

Housing Bust and the Economy

EconBrowser discusses a paper by Claessens, Kose and Terrones, entitled “What Happens During Recessions, Crunches and Busts?”  The authors look at what happens historically to important macroeconomic variables when there is either a recessions, a credit contraction, an episode of house price declines, and/or an episode of equity price declines.  The authors find the following:…