One of the reasons that we're sitting here in a recession, facing the worst financial crisis since the Great Depression (according to Alan Greenspan) is that most reporters never reported on the housing bubble as it grew to ever more dangerous levels. The most cited source on real estate markets during the years 2002-2006 was David Lereah, then the chief economist with the National Association of Realtors, and the author of the 2005 bestseller, Why the Real Estate Boom Will Not Bust and How You Can Profit From it. I have yet to see any mea culpas from reporters or editors, indicating that they now recognize that relying on a guy who works for the realtors, as their main source on the housing market, may not be good journalism. As Congress considers bailouts, reporters don't seem to have picked up their game. One of the main proposals on the table is the Dodd-Frank bill to have the government effectively buy up many of the bad mortgages and issue new ones to low and moderate income homeowners. This proposal, or a version of it, appears to be gaining considerable support in Congress and the two Democratic presidential candidates. Is this proposal a good idea? If anyone has provided some serious analysis, I have missed it. The obvious question in my book is who does it help. The answer to that will depend on the market in which the mortgages are issues. The answer will be very different in markets like Detroit and Cleveland, where there was not much of a bubble, as compared to cities like San Diego and Phoenix, where the bubble is half deflated. Anyhow, the point is not to give the story here. The papers and broadcast media should be presenting some analysis of these proposals to their audience. It hasn't been visible so far.
--Dean Baker
