Obama Pumps A New Housing Bubble

Obama administration pushes banks to make home loans to people with weaker credit ... The Obama administration is engaged in a broad push to make more home loans available to people with weaker credit, an effort that officials say will help power the economic recovery but that skeptics say could open the door to the risky lending that caused the housing crash in the first place. President Obama's economic advisers and outside experts say the nation's much-celebrated housing rebound is leaving too many people behind, including young people looking to buy their first homes and individuals with credit records weakened by the recession. − Washington Post

Dominant Social Theme: No homeowner left behind.

Free-Market Analysis: It's happening again ... In the late 1990s, credit was screwed down in the US, creating in the tech bubble and bust. In the early 2000s, the Fed kept rates so low that some homebuyers actually received offers of remuneration were they to take advantage of credit offers.

There was a lot of talk early on during the financial crisis about the Fed's too-low rates. But all that died away with Ben Bernanke's various quantitative easing programs.

It was a kind of "shock and awe." What Bernanke had decided to do was so outrageous that it made low rates pale by comparison. When there are reports of Bernanke writing checks for up to US$16 trillion, it is hard to summon a great deal of interest in discussions over too-low rates.

And no doubt, this is what the Obama administration is counting on – though why they would seek to repeat the mistakes of the earlier 2000s when they are still fresh in the minds of many is a puzzle. But it seems the administration is going too push ahead.

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