The Volokh Conspiracy - Did the Fed Cause the Housing Bubble?

I was traveling over the weekend and so didn't get a chance to post on Friday about my latest piece in the WSJ, a contribution to an Editorial Page symposium on Alan Greenspan's argument a few weeks ago that the Fed didn't cause the housing bubble.

My argument that the Fed did is in the WSJ, "Low Rates Led to ARMs". It is about halfway down the page.

Some readers will remember that during the fall I posted here the chart that provides the data that I summarize in my Friday column.

In a nutshell, the economic argument is that the substitution by consumers of ARMs for FRMs provides the economic mechanism for Federal Reserve short-term monetary policy to affect housing prices that both Greenspan and John Taylor had not discussed. Greenspan focused on the constancy of the 30-year rate and Taylor focused on the interest rate without providing a mechanism for converting short-term rates into housing prices (which was Greenspan's basic response to Taylor).

	[Todd Zywicki, March 30, 2009 at 8:55am] Trackbacks Did the Fed Cause the Housing Bubble? I was traveling over the weekend and so didn't get a chance to post on Friday about my latest piece in the WSJ, a contribution to an Editorial Page symposium on Alan Greenspan's argument a few weeks ago that the Fed didn't cause the housing bubble. My argument that the Fed did is in the WSJ, "Low Rates Led to ARMs". It is about halfway down the page. Some readers will remember that during the fall I posted here the chart that provides the data that I summarize in my Friday column. In a nutshell, the economic argument is that the substitution by consumers of ARMs for FRMs provides the economic mechanism for Federal Reserve short-term monetary policy to affect housing prices that both Greenspan and John Taylor had not discussed. Greenspan focused on the constancy of the 30-year rate and Taylor focused on the interest rate without providing a mechanism for converting short-term rates into housing prices (which was Greenspan's basic response to Taylor).