Wednesday, December 9, 2009

Two Real Estate Booms and Busts Compared

Eugene N. White compares the 1920s and the recent episode in an NBER working paper here . He concludes that the elements absent in the 1920s were federal deposit insurance, the “Too Big To Fail” doctrine, and federal policies to increase mortgages to higher risk homeowners. These factors combined induced risk-taking that was crucial to the eruption of the recent financial crisis.

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