The View From 1776

America After Obama
By Jeff Lukens

Barack Obama has gone from the “one we’ve been waiting for” to the one we can’t wait to kick out. No one ever thought one man could bring the nation to its knees, but here he is living in the White House. And on our knees we have been praying for the day that he leaves.

The audacity of a president hell-bent on destroying our great nation has truly been a stunning spectacle to observe. No lie is too ridiculous to tell about anyone who opposes him. With a compliant media behind him, the smears this Demagogue-in-Chief promises to unleash on his opponent this fall could divide the county so badly that it becomes ungovernable.

The societal tensions Obama promised to ease have worsened by his politics of envy. The racial healing he promised has been made worse. Despite overwhelming opposition, he forced a health plan on the people that few want. He has trampled on the Constitution, and infringed on powers granted to Congress. He has bailed out auto companies, investment bankers and insurance companies. He has given Constitutional rights to terrorists.

Obama’s greatest transgression, however, has been the explosion of government spending to the point where we are enslaved to a mountain of debt that can never be repaid. He has given us $1.6-trillion deficits, and will have added more than $6 trillion to the debtby the end of his term. He has risen the percentage of GDP consumed by government to 25 percent. And all his spending has stimulated nothing.

If you believe what the government reports, total unemployment is currently 15.2 percentas measured by U-6. During Obama’s tenure, true unemployment has been running greater than 20 percent and is near Depression Era levels. In sum, Obama’s presidency has hastened a financial disaster upon the nation.

Obama calls his policies “transformation.” In an earlier age, they would have been considered something akin to treason. Our enemies could not have planted someone to have caused more damage. And now, with financial collapse on the horizon, our very way of life is threatened.

Altogether, Barack Obama will probably go down in history as the worst president of all time. Until now, historians have long given that dubious distinction to James Buchanan, who left office to Abraham Lincoln as the nation was falling apart and headed toward civil war. It is no exaggeration to say the 2012 election is every bit as important as was the 1860 election. James Buchanan at least had good intentions. The same cannot be said for Barack Obama. His intent is not to build up, but only to tear the nation down, and then to cover his tracks. There is no other way to explain his actions.

Millions of Americans, however, have finally had enough. A counterrevolution is rising to a level rarely seen in our history. There hasn’t been this intensity of grassroots activity since the abolitionist movement of the 1850s. People are making themselves visible in the community. They are organizing rallies and call-in campaigns. They are studying the Constitution, and will not be silenced by charges of racism or any other falsehood uttered by the Left.

And when the new president is sworn in, collective relief will be felt across the land. But the long and hard road to recovery will have only begun. Whether America avoids financial collapse will be uncertain for years to come.

For a government that borrows 36 cents of every dollar it spends, the math is simple. We will need real cuts to the federal budget near 36 percent to survive. Factor in modest economic growth and perhaps the cuts could be 30 percent. But failure to make real cuts on this scale risks runaway inflation and disaster. Any way you look at it, people’s pain will be deep, and it will be real.

With Obama gone and the threat of reprisals removed, people will begin to talk, and eventually the truth about Obama’s mysterious past will come out. What was hidden, scrubbed, and not vetted in 2008—including his grades, his college records, his passport, his personal associations, and yes, even his birth—will all be exposed. It is all just a matter of time. The duplicity and deceit to be uncovered will shock even his most ardent supporters.

Who knows? A pariah status could very well attach itself to Obama on a level reserved for few individuals in American history. Obama could be regarded as the Benedict Arnold of our time. The masses may come to shun him, and rightly so. If there is poetic justice in this world, this will be his legacy.

November is not just another election; it is a seminal moment in American history. If Obama is reelected, expect ObamaCare to stay, the debt to crush us, our defenses to be laid bare, Iran to get the bomb, and at least two liberals to be named to the Supreme Court. If Obama is reelected, America as we know it will be gone forever. Collapse will be certain.

For true hope and true change, perhaps we should try returning to a limited Constitutional government. We all need to be involved. Whether or not we can turn around the disaster Barack Obama has foisted upon us hinges first on removing him from office. Now is the time to go about the work of doing just that. This is the year, folks. Buckle up. It’s going to be a rough ride.

Jeff Lukens is a staff writer for the New Media Alliance, a non-profit (501c3) national coalition of writers, journalists and grass-roots media outlets.

The Scottish Enlightenment and America’s Founding: The Drama of the Constitutional Convention
By Robert Curry

“Discussion began on June 1 with the Virginia Plan, introduced by Virginia Governor Edmund Randolph and privately drafted by Madison …It would have resembled the parliamentary system of government that exists in much of the world today…[James] Wilson argued early on for a single President to be directly elected by the people…A small group of delegates, known as “the committee of detail”…produced a draft Constitution in early August.  Wilson, the consistent supporter of an independent executive, headed the committee, and it showed.  The Constitution now vested “the executive power of the United States” in one man.”
John Yoo, Crisis and Command

No doubt it is impossible to quantify the impact of the Scottish Enlightenment on America’s founding.  This is the kind of question that can be endlessly debated by scholars. It simply is the case that many factors contributed and many streams of causation converged to make America’s founding possible.

However, it would be possible to dramatize the impact of the Scottish Enlightenment.  That is of course true because the dramatist’s task is in one sense much simpler than the task of the historian.  The dramatist is free to create characters and structure the action to convey his message; the historian must deal with stubborn facts, with what actually happened. 

Remarkably, the actual course of events during the Constitutional Convention, as if by dramatic intent, seems designed to draw our attention to the enormous importance of the Scottish Enlightenment in America’s Founding.

Conceived as a dramatic work, Madison and Wilson were given the roles that drive the action.  Madison opened with the Virginia Plan; Wilson played a central role in the debate and in the final decisive action, the drafting of the Constitution by the committee that gave it the shape we know today.  Remarkably, their central roles also dramatize the impact of the Scottish Enlightenment on the American Founding.  That is so because Madison and Wilson taken together perfectly symbolize that impact. 

Madison perfectly symbolizes one half of the story of the Scots in America.  He represents the Revolutionary generation of Americans trained by the wave of Scots who brought the Scottish Enlightenment to America.  As Gary Wills observed, “At age sixteen Jefferson and Madison and Hamilton were all being schooled by Scots who had come to America as adults.” Madison’s tutor, Donald Robertson, was a product of the Scottish Enlightenment at its peak, but the great intellectual influence on Madison was John Witherspoon, also a Scot.  When Madison entered Princeton in 1769, under the leadership of Witherspoon it had become the American university where the great thinkers of the Scottish Enlightenment—Hume, Smith, Hutcheson, Reid, Ferguson and Kames—were studied most intensely. 

As for Wilson, he is a perfect symbol for the other half of the story because he was actually a part of that wave of Scots in America. A member in good standing of the Scottish Enlightenment, educated at St. Andrews, Glasgow and Edinburgh at the height of the Scottish Enlightenment, he was also a signer of the Declaration—one of only 6 men who signed both documents. On stage, in our Constitutional-Convention-as-drama, we would be constantly reminded of the Scottish influence by Wilson’s strong Scottish accent.

Giving Madison and Wilson the roles that drive the action highlights the impact of the Scottish Enlightenment.  Seen as drama, the action becomes a debate between the two characters who symbolize the story of the Scottish Enlightenment in America.

In addition, the design of the drama includes another device that brilliantly highlights the significance of Madison and Wilson.  Each is elevated by being closely associated with one of the two most esteemed men in the room—George Washington and Benjamin Franklin.  Everyone in the room knew that Madison spoke for Washington; he was even seated to Washington’s right and beside the dais from which Washington presided.  Only Washington and Madison faced the other delegates.  Wilson was paired with Franklin, and Wilson read Franklin’s prepared statements for him.

For these pairings to succeed dramatically, we only need to keep in mind just how much Washington and Franklin were the very symbols of America.  Washington, “the Father of the Country,” and Franklin, “the First American,” were for Americans of that time America’s two iconic figures. 

The dramatic impact of Madison and Wilson’s pairing with Washington and Franklin is greatly enhanced by the comparative silence of the two icons.  Washington rarely spoke, confining himself to the role of president of the Convention. Except for the prepared statements that Wilson read for him, Franklin also limited his remarks to a few critical moments when his enormous prestige was needed to make a way forward.  Their brilliant junior associates conducted the campaign. Madison and Wilson, our symbols of the Scottish Enlightenment’s impact on America, are given center stage.

Considered purely as drama, pairing Wilson the Scot and Madison the Scottish-educated American with the two great icons of America, and giving Wilson and Madison their key roles in the debate seems designed to send us today a powerful message about the importance of the Scottish Enlightenment to America’s founding. 

At his January 25, 2012, press conference, Federal Reserve Bank chairman Ben Bernanke stated that he expects the Fed to continue imposing near-zero interest rates well into 2014 on short-term Treasury securities.  In response, the stock market surged, despite expectations of generally lower corporate earnings and reduced consumer spending.  Loose credit and low interest rates usually facilitate stock market speculation.

However gratifying this may to individual investors and pension fund managers, it does little if anything to restore production of goods and services or to raise employment.  It also continues to penalize increased savings, which alone provides a stable, long-term platform for economic growth.  People living on fixed incomes have had their rates of income on saving chopped around 75% since the Fed first cut interest rates.

As Austrian school economists long have observed, central bank manipulation of interest rates and government deficit spending has an uneven impact on sectors of the economy.  When unemployment is high and people are yet freighted with excessive personal debt, consumer spending will be among the last sectors to increase.  Instead, deficit spending and loose money lead businessmen to over-invest in long term capital goods, because low interest cost for borrowed money makes even marginal investment projects appear profitable.  When business finally revives and costs, including interest rates, increase, those marginal projects collapse and push the economy into recession.

Such was the genesis and progress of the housing bubble and subprime mortgage securities. 

Contrary to the aggregate computer models of Keynesian economics, the economy as a whole never has been controllable via government stimulus spending. In fact, as reported recently, the 31% increase in business long-term investment over recent months has been largely concentrated in labor-saving equipment, which ironically adds to unemployment or postpones new hiring.

The collapse of Solyndra and Kodak’s bankruptcy filing illustrate the difference between a socialistic planned economy and capitalistic free enterprise.  Under state planning, uneconomic companies can be created and failing ones propped up by the state.  Under free enterprise, only companies that have a good chance of prospering will be bankrolled by investors, and those that don’t prosper will be left to fail.

Kodak for generations was an international icon of private technological success.  Solyndra never even got off the ground.

In the first decades of the 19th century, when the doctrines of socialism were being codified, the concept of social engineering emerged.  Belief in the possibility and effectiveness of a planned economy is the central economic doctrine of liberal-progressive-socialism.  Presumably disinterested, state-appointed managers would do a better job delivering a more abundant supply of socially useful goods and services than putatively greedy, profit-oriented businessmen.

President Obama’s administration is firmly rooted in that early socialistic vision, modified by Lenin’s Gosplan 5-year programs.  Examples are take-over and re-structuring of the banking system and imposing a car czar and labor union ownership on General Motors. 

Obama’s penchant for socialistic state planning is particularly evident in federal financing for economically unsustainable “green” energy companies, none of which could survive without direct subsidies, tax breaks, and punitive regulation of private business competitors.  More than $1.5 billion has been funneled down the rat hole of green energy projects, of which Solyndra is one of the more notorious.

Contrast Obama’s state-planning with a free-enterprise system in which companies must satisfy consumer desires, while supporting themselves and making sufficient profit to finance equipment replacement and growth.  State-planned investment is channeled by political favoritism for special-interest groups and by ideology disconnected from the real world.

Under our original constitutional government, individuals were permitted to keep as much as they could save from the fruits of their labors and to invest their savings in any way they chose.  Most people, having worked hard to save some money, are careful about where they invest it.  The intermediaries in which they invest their savings — banks, mutual funds, life insurance companies, and pension funds — have a fiduciary duty to invest their depositors’ funds in prudent business ventures that can be reasonably expected to grow and prosper. 

The critical point is that the capital necessary to start and to run a business is separated from the business people.  Businessmen want money to create or expand their ventures.  Lenders and investors want to lend money to businesses only when they can be reasonably sure of getting it repaid, plus a profit reflecting the risk incurred in lending and investing.  Capitalism thus has a built-in regulator, a system of internal checks and balances.

To get money, businesses must first convince hard-eyed lenders and investors that a market exists for their products and that they can satisfy that market’s demands.  Lenders and investors have strong incentives to avoid bad loans and investments: they lose their jobs and their own money if they don’t. 

In liberal mythology capital and business are lumped into one evil mass that is dominated by a single-minded lust to plunder society.  Liberal-progressives picture a massive power bloc called Big Business and The Rich who can do anything they want and can force you to buy their products, most of which liberals think are bad for you. 

In reality, you as a consumer are the final boss of every business.  If you and enough of your fellow consumers don’t like the company and don’t buy its products, the financial intermediaries stop funding it, and it goes out of business or declares bankruptcy.  That, unhappily, was Kodak’s fate.

Contrast this with liberal-progressive-socialism.  Businesses approved by the state-planners don’t have to compete with rival businesses to get funds.  They get funding directly from the National State, in accordance with a master plan for the economy. 

Consumers play no role at all in the process, since their product preferences have no effect (e.g., tungsten light bulbs).  Planners make all the decisions about what is produced, how much of it, and where it is to be delivered.  Grossly inefficient and outmoded business enterprises, for that reason, survive decade after decade in a socialist economy.

From 1917 until 1987, liberal-progressives in the United States praised the Soviet Union as a society in which every aspect of life was better for all citizens than in capitalist countries.  When the Soviet Union collapsed, all the world finally were compelled to swallow the plain facts: apart from military armaments, Soviet businesses were operating at below third-world levels of productivity and their depredations of the environment had been wrought on a colossal scale.  The average Soviet citizen had a lower standard of living than the poorest of American welfare dependents in the inner cities. 

The Democrat-Socialist Party has done its best to move us along the Soviet path, never losing blind faith that success is just a matter of sufficiently huge deficit spending.

An article on the Barron’s website tells the story.

On Borrowed Time
Heavy debt loads slow the U.S. economy now and pose threat to the future.

By RANDALL W. FORSYTH

Can a stimulant become a depressant? As with alcohol, government borrowing and spending initially can give a boost, but later becomes a drag. America has hit the downside of that progression.

So says Lacy H. Hunt, chief economist of Hoisington Investment Management (whose eponymous head, Van R. Hoisington, recently was interviewed in the print edition of Barron’s.) The deficits that had aimed to stave off a rerun of the Great Depression after the 2008 financial crisis now are having a depressing effect on the U.S. economy, Hunt contends.

Catching up with Hunt on the road after meetings with Hoisington clients, he expounded on his latest quarterly review, “High Debt Leads to Recession,” a conclusion that runs counter to economics as it is taught in most institutions of higher learning. For most of us who studied the conventional Keynesian economics as taught in the textbooks of Paul Samuelson and his successors, government spending “primes the pump,” to get money back into the economy after the flow of spending had been turned off by a private sector, which was intent on saving “too much.” As a result, resources sat idle, especially the unemployed. Borrowing and spending by government would expand national income by a multiple of its expenditures.

Actually, the opposite is happening. The multiplier from government spending is no better than zero, Hunt says on the basis of econometric evidence. If the economy is “shocked” with a deficit, gross domestic product will get a lift for three-to-five quarters. After 12 quarters, however, the original stimulus is spent, literally and figuratively. But the debt that was incurred to finance the spending remains, and has to be repaid, with interest. That requires a shift of assets from the private sector to the public sector.

Japan provides an example of this process. That nation’s government debt has expanded during its “lost decades” to 200% of GDP from 50%. Meanwhile, nominal GDP in yen terms is basically unchanged. In other words, Japan’s debt has quadrupled but has nothing to show for it—except higher interest costs, which has to come out of the private sector.

Hunt cites the now-familiar conclusion that debt-to-GDP ratios over 90% retard growth from economists Kenneth Rogoff and Carmen Reinhart, authors of the popular This Time is Different: Eight Centuries of Financial Folly, who also presented that conclusion in a 2010 National Bureau of Economic Research working paper, Growth in the Time of Debt.
Hunt also points to an even more exhaustive study on the effects of debt from Stephen G. Cecchetti, M. S Mohanty and Fabrizio Zampolli from the Bank for International Settlements, presented at the Federal Reserve’s Jackson Hole confab last year, The Real Effects of Debt , which takes into account the retarding effect of not only government but also corporate and household debt. Those imply “that the debt problems facing advanced economies are even worse than we thought,” especially when unfunded future liabilities in the form of promises given by governments in retirement and medical benefits are counted.

So, I asked Hunt, is there any way out of this apparent debt trap? Nothing that’s politically popular, he says. Without tackling the unfunded liabilities of Social Security and Medicare—which total some $59 trillion, dwarfing the U.S. bond debt of $15 trillion—there’s little if any anything that can be done. Federal outlays—which total 25% of GDP, unprecedented except in World War II—are headed to 40%, according to economist Barry Eichengreen of the University of California at Berkeley. Absent the political reforms needed to rein that percentage in, he writes, “The United States will suffer the kind of crisis that Europe experienced in 2010, but magnified,” Eichengreen writes.

The solution to the U.S. debt problem requires robust economic growth, not the downward spiral that Europe’s most indebted economies, such as Greece, now are experiencing. Government spending has negligible or negative long-term impact on growth, Hunt says, based on econometric evidence. So-called tax expenditures, the most prominent being the mortgage-interest deduction, do little if anything to spur growth. But changes in marginal tax rates have significant multiplier effects.

What’s needed then, says Hunt, a comprehensive package of shared sacrifice along the lines of the Bowles-Simpson plan, which was unveiled a year ago and shelved. Since then, the U.S. has had a contrived crisis over the debt ceiling and a less-than-super committee that couldn’t make basic choices about spending. Hunt says his package would consist of cutbacks on government spending and tax expenditures, which slow growth, with stable or lower marginal tax rates. At minimum, stabilize policies so businesses can plan and invest and hire.
This dire long-term view of U.S. finances seems at odds with Hoisington’s continued position in the longest-term Treasury bonds. And those long Treasuries produced 30% total return in 2011. For the deflation pressures from various sources, including heavy U.S. total debt, Hunt looks for Treasury bond yields to fall still further, from just 3% currently. But, he adds, his firm is ready to switch tacks if and when debt problems push yields higher.

When the facts change, Hunt says Hoisington Investment Management’s portfolios will change, alluding to Keynes’s famous dictum. That may be the only thing on which Hunts agrees with Keynes.

The Fed failed completely to foresee the 2007-2008 housing meltdown and the collapse of the financial system.  The Fed failed completely to foresee the dot.com boom-and-burst that threw the economy into recession at the end of President Clinton’s tenure.  The Fed failed completely to foresee the stagflation of the 1970s (it was, in fact, proclaiming its success at fine-tuning the economy using Keynesian economic tactics).  The Fed pumped up the money supply sharply during the 1920s, failing completely to foresee the 1929 stock market crash and the Great Depression.

The following excerpts from an article in today’s Wall Street Journal bring us up to date on the dangerous folly of allowing the Fed to attempt management of the economy, particularly when it espouses the Keynesian belief that financing the government’s deficit spending will automatically end a recession without inflationary distortions to people’s standards of living.

Fed 2006 Transcript Highlights: Riding Housing Roller Coaster With Eyes Shut

Federal Reserve Chairman Ben Bernanke and most of his colleagues showed little concern when house prices started to decline in 2006, predicting “a soft landing” in the then-strong U.S. economy, transcripts from the central bank released Thursday show.

Bernanke, who took over from Alan Greenspan as Fed chairman in February 2006, is cautious in making forecasts about housing and the wider economy. But, together with then New York Fed chief Timothy Geither, he believes the slowdown in housing is healthy and likely to end well.

MAR. 27-28: In Bernanke’s first meeting as Fed chairman, housing looms as a risk, but officials haven’t grasped the severity of the threat. The Fed’s chief economist, David Stockton, offers some ominous warnings. “Right now, it feels a bit like riding a roller coaster with one’s eyes shut,” when discussing his forecast for a modest slowdown in housing. “We sense that we’re going over the top, but we just don’t know what lies below.” Later, he notes that housing is “the most salient risk” to the economy. “I just don’t know how to forecast those prices,” he says of housing prices.
“Again, I think we are unlikely to see growth being derailed by the housing market, but I do want us to be prepared for some quarter-to-quarter fluctuations,” Bernanke says. He identifies housing as a crucial issue, but adds that he agrees “with most of the commentary that the strong fundamentals support a relatively soft landing in housing.
Timothy Geithner, who is now Treasury Secretary and was then president of the Federal Reserve Bank of New York, doesn’t see the parallel risks building in the financial system. “Equity prices and credit spreads suggest considerable confidence in the prospect for growth,” he says. “Overall financial conditions seem pretty supportive of the expansion.”
In terms of policy, Bernanke picks up where predecessor Greenspan left off: with another quarter-point boost in interest rates, and a hint of more to come.
But he puts a modest stamp of his own on the Fed’s closely watched post-meeting statement, by including a more explicit view of where the nation’s economy is headed. The statement’s forecast that economic growth appears likely “to moderate to a more sustainable pace” may be an early, though small, sign of his efforts to make the central bank’s thinking more transparent.

MAY 10: Fed officials spend a lot of time discussing rising energy prices and risks to inflation and agree to raise short-term interest rates by 0.25%. Susan Bies, a Fed governor, tries to bring the discussion back to housing and her growing worries about mortgages. She looks enlightened in retrospect in a discussion about the risks that increasingly exotic mortgages pose to consumers and banks.
Bies points in particular to negative amortization loans, in which household loan balances get bigger and not smaller over time. “I just wonder about the consumer’s ability to absorb shocks,” she warns. “The buildup of home equity and the ability to borrow against it have helped individual homeowners when they have had layoffs, medical problems, divorces-all the things in life that create month-to-month problems for cash flow. With the growth of negative amortization, home equity is not being built up anymore.” She sums up with a ominous warning: “The growing ingenuity in the mortgage sector is making me more nervous as we go forward in this cycle, rather than comforted that we have learned a lesson. Some of the models the banks are using clearly were built in times of falling interest rates and rising housing prices. It is not clear what may happen when either of those trends turns around.”
Bernanke acknowledges the risks, but doesn’t sound overly worried: “So far we are seeing, at worst, an orderly decline in the housing market; but there is still, I think, a lot to be seen as to whether the housing market will decline slowly or more quickly. As I noted last time, some correction in this market is a healthy thing, and our goal should not be to try to prevent that correction but rather to ensure that the correction does not overly influence growth in the rest of the economy.”

JUNE 28-29: In summarizing Fed officials’ views, Bernanke notes how it’s getting more and more difficult to make forecasts, describing the economic situation as “exceptionally complicated.” Since housing is particularly hard to project, Bernanke calls it “an important risk and one that should lead us to be cautious in our policy decisions.”
The Fed raises interest rates to 5.25% from 5% at this meeting, the 17th increase in a row. But for the first time since it began raising rates from a low of 1% in June 2004, the Fed doesn’t explicitly say another rate increase was under consideration.
AUG. 8: Bernanke reminds his colleagues that the Fed has not been “terribly successful with soft landings” in the economy. Then he adds: “We have a chance to get one.” Janet Yellen, the Fed vice chairwoman who headed the San Francisco Fed in 2006, appears to be the most concerned about housing, warning that the housing slowdown could become an “unwelcome housing slump.” The central bank leaves rates unchanged at this meeting after two years of steady increases. Geithner wants to cite housing weakness as a factor, but the majority is against that.
SEP. 20: The Fed cites housing and energy declines in holding interest rates steady. However, chief economist Stockton says that the economy “bends but doesn’t break” under one Fed forecasting scenario of a housing slump. “So far the collateral damage from the downturn in housing has been limited, and for the most part, we expect it to remain that way, at least for a time,” he says. Bernanke notes there’s a split on how housing is viewed at the Fed, with some expecting a deep correction while others believe incomes and rates will support housing. Here’s how he sums it up: “the economy except for housing and autos is still pretty strong, and we do not yet see any significant spillover from housing.”
At points, some officials played down the housing and mortgage threats. “As one CEO told me, the only subject that has been more analyzed than the housing situation is the birth of Brad Pitt’s baby,” Dallas Fed president Richard Fisher said in the September meeting. “According to this view, if we have not discounted what has been happening in the housing market, we have been living on Mars, and I think that is an important point to take into account.”
Asked to comment Thursday, Mr. Fisher noted that he wasn’t dismissive of the threat. In that same September meeting, for instance, he noted that he was more pessimistic about the housing outlook than was the Fed’s economics staff in Washington. The previous month he noted that one homebuilder said the housing correction was the “roughest and most sudden” he had seen.

DEC. 12: The meeting that closes out the year sees policymakers showing little rising awareness of the storm coming their way. Indeed, much of the conversation officials have was about employment and inflation. Some of the evidence of rising weakness in housing was seen largely as a correction for past excess, rather than the genesis of the worst financial crisis since the Great Depression.
Boston Fed boss Cathy Minehan then observes her district was seeing a slowdown in housing, but she saw no great concern in this development. The Richmond Fed President Jeffrey Lacker notes a mixed housing picture: he doesn’t see any great catastrophe coming the sector’s way. Cleveland Fed leader Sandra Pianalto flags some borrowers’ increased difficulty in getting mortgages in her region. Then Fed Vice Chairman Donald Kohn says rising inventories in manufacturing was “a bit more troubling” than the cooling in housing activity he’d seen.
Fed Governor Bies once again looks ahead of the curve. She says “the amount of leverage in each housing deal may still need some correction going forward, and so we may see some slowdown in the volume of dollars that are funded through mortgage lending.” She also says that in markets there is a realization “that a lot of the private mortgages that have been securitized during the past few years really do have much more risk than the investors have been focusing on.”
Bernanke fails to see any major problem brewing in housing based on his comments in the transcripts, once again predicting a “soft landing” for the economy.