What if anything could the federal reserve have done a year ago that would of stop real estate bubble burst?

Answer 1

The first thing you need to understand is that the Federal Reserve does not directly control the mortgage industry or any aspect of it. But what the Fed does do affects and effects the entire economy, ours and the world.


The second thing to know is that the Federal Reserve is NOT the Federal Government or any Branch, or Department of it. The Federal Reserve is a private bank.

"If the American people ever allow private banks to control the issue of their currency, first by inflation then by deflation, the banks and the corporations will grow up around them, will deprive the people of all property until their children wake up homeless on the continent their fathers conquered. The issuing power should be taken from the banks and restored to the people, to whom it properly belongs."---Thomas Jefferson, The Debate Over The Recharter of the Bank Bill, (1809)”

“http://www.americanchronicle.com/articles/viewArticle.asp?articleID=39040

Anyone who trades stocks or options knows, nothing happens until something happens, and when something does happen, it does not matter whether the market is moving up or down, if you are playing the correct side of the move you make money.

The real purpose of the Federal Reserve is not to stabilize the economy but to continually DE-stabilize it.
http://www.investorguide.com/igu-article-1065-monetary-policy-and-the-fed-federal-reserve-exposed.html

Answer 2

Probably nothing. The "Fed" does not regulate the mortgage industry or directly control real estate prices.

Raising rates more quickly and more substantially than they did MIGHT have stemmed some of the "irrational exuberance" as former Chariman Greenspan would have put it but that would have triggered other economic problems that may have spilled over and affected the real estate markets in other ways.

When interest rates rise, the economy cools off as costs rise. That would have slowed the growth of the real estate market and stifled sales as the cost of mortgage money rose and cut some folks out of the market entirely. Property values MIGHT not have dropped as much as they did in some areas BUT sales still would have slowed in most markets, even those that haven't been significantly impacted by the current problems.

Interest rates CAN indirectly influence property values, the thinking being that buyers can afford larger mortgages when rates are low. However when buyers take out risky loans with unrestricted future rate rises built in they are at the mercy of the lenders and market forces which cannot accurately be predicted. This is what has lead to most of the current troubles in most real estate markets.

Answer 3

They may not have created this problem but, they have known about it for at least two years. This was a predictable event and it is not news to anyone on the inside of the situation. We have not seen an increase in jobs in the us in the past two years, we have not seen an increase in spending in the past two years. If those two things don't happen then people don't get raises because the growth of "supply and demand" isn't rising. So with a negative growth or spending (they go hand in hand) there is no extra money to support a change in interest rates that had been planned into the mortgages. It just didn't happen and frankly I don't think anyone really considered that it could. So this was an expected event and it offers investors a golden opportunity to snap up properties that they may never have had access to otherwise. See?

Answer 4

They could have done many things:

Up the requirement for sub-prime loan

Force the states to crack down on the many unquestionable actions of loan officers, housing inspectors, and builders.

And yet I don't think any of those things, and the many other things they could had done, would had stop the bubble from bursting.

Simply put, nothing created the bubble, but the high demand for homes. How do you stop that? And if there is a bubble it will pop sooner or later.

The bubble popping happened before and it will happen again and again. All we can do is know that it is coming and profit from it.

This is the time to buy low, wait for the rise in the market, and sell high. That if you have the money or good credit to do it.

Answer 5

Nothing. The Federal Reserve created the bubble by keeping interest rates artificially low for a few years now. They could have raised rates and that might have helped, but this is never politically acceptable.

Answer 6

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