9/11 Legacy Includes Effect on Housing Boom and Bust
Saturday, September 10, 2011
The Daily Transcript -- In the months after the attacks of Sept. 11, the Federal Reserve took a series of steps to lower overnight interest rates in order to ensure the tenuous economy didn’t tip back into recession. The economy, still recovering from the dot-com bust and dealing with the psychological effects of the attacks, needed to be propped up in the form of easy money, according to Chairman Alan Greenspan and the rest of the Fed.
... Norm Miller, economist at the Burnham-Moores Center for Real Estate at the University of San Diego, said the actions of Fannie Mae and Freddie Mac were more to blame for the housing boom than the actions of the Fed to slash rates after 9/11. “It definitely was the perfect storm of Fannie and Freddie jumping into the subprime mortgage market, private market providing low interest rate teaser loans, the private market providing second mortgages like crazy, and brokers who had no skin in the game and kept pressuring people to refinance and pull cash out of their houses like ATM machines,” he said. (Full Story)