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**P9CCd35R** · 09-17-2008, 11:40 PM

The Fed's easy money policies are a direct result of the real estate bubble bursting. So much or US growth and wealth over the past 10 years or so has been fueled by over valued real estate.

The Fed kept rates down since 9/11. This cheap credit is what allowed housing to take off. If mortgage rates were allowed to rise five years ago there never would have been the speculation spiral and subsequent meltdown.

Downward pressure on mortgage rates allow house prices to rise and conversely rising rates stabilize prices and keep the market honest.

Don't forget that the easy money driving the writing of these subprime loans also supplied investment banks with virtually endless capital to over-leverage and arbitrage themselves to death gorging on high yield instruments.

Lots of people are to blame, but fundamentally the signal sent to the overall capital markets by Fed rates set the tone and enabled this bubble.

09-17-2008, 11:40 PM	#45
P9CCd35R Join Date Oct 2005 Posts 466 Senior Member	The Fed's easy money policies are a direct result of the real estate bubble bursting. So much or US growth and wealth over the past 10 years or so has been fueled by over valued real estate. The Fed kept rates down since 9/11. This cheap credit is what allowed housing to take off. If mortgage rates were allowed to rise five years ago there never would have been the speculation spiral and subsequent meltdown. Downward pressure on mortgage rates allow house prices to rise and conversely rising rates stabilize prices and keep the market honest. Don't forget that the easy money driving the writing of these subprime loans also supplied investment banks with virtually endless capital to over-leverage and arbitrage themselves to death gorging on high yield instruments. Lots of people are to blame, but fundamentally the signal sent to the overall capital markets by Fed rates set the tone and enabled this bubble.
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