PeakTrader.com

[administrator]

PeakTrader said...

When regulations benefit banks at the expense of homeowners, then of course banks will be stronger.

--------

Mark J. Perry said...

When regulations benefits borrowers at the expense of banks, then of course you can expect a fragile banking system, thousands of bank failures, recurring financial/banking crises, recessions, depressions, etc.

-------

PeakTrader said...

In 2006, the average square footage of a U.S. house was about 2,500 square feet and the average footage of a Canadian house was around 1,800 square feet.

--------

Mark J. Perry said...

Even with its pro-lender regulations, Canada's homeownerhip rate is actually higher than the U.S.

---------

Mark J. Perry said...

Peak: That's just more evidence of American "excess" due to "dumb" regulations that encouraged unsustainable, excessive rates of home ownership, and excessive "size."

--------

PeakTrader said...

The U.S. homeownership rate was higher when the housing market peaked in 2006, and Canada's homeownership rate is only slightly higher today, even after years of deep depression in the U.S. housing market.

--------

PeakTrader said...

Dr. Perry, it's a bubble only if it bursts.

The U.S. housing boom lasted over 10 years, from 1995-06, and it didn't have to collapse.

---------

Mark J. Perry said...

I think the bank failure statistics speak for themselves. USA: more than 12,000. Canada: Zero (or very close to zero).

----------

PeakTrader said...

That's what happens after government fails to slow a housing boom (in 2004), tips the country into a severe recession (in 2008), and implements weak and expensive stimulus policies (from 2009 to today).

---------

Craig said...

"When regulations benefit banks at the expense of homeowners, then of course banks will be stronger."

But Canadian regulations most certainly do not benefit the banks at the expense of homeowners. Homeowners have absolutely nothing to do with banking regulations.

It's people who are attempting to buy homes with money borrowed from the bank who are regulated.

--------

PeakTrader said...

Craig, if banks don't benefit lending for smaller houses, and homebuyers don't benefit for borrowing for smaller houses, then who does?

---------

Expected Optimism said...

A lack of failing companies in an industry isn't necessarily a sign of a healthy industry. I'm not sure if it's still true, but in 2009, the Canadian government became the world's largest holder of subprime mortgages. When just five banks have a combined market share of over 90%, "too big to fail" takes on a whole new meaning.

Moreover, anyone who believes in Schumpeterian creative destruction should be worried about an industry with zero failures.

--------

PeakTrader said...

Johnberkowitz, the financial crisis was caused by a giant government unfunded social program that the government assumed it didn't have to fund.

It created so much "moral hazard" that the entire U.S. financial system was on the verge of collapse:

What Caused the Financial Crisis
November 16, 2010

"Starting in the late 1990s, the government, as a social policy to boost homeownership, required Fannie Mae and Freddie Mac to acquire increasing numbers of "affordable" housing loans. (An "affordable loan" is made to people who normally would not qualify.)

By 2007, 55 percent of all loans made by Fannie and Freddie had to be "affordable." By June 2008, there were 27 million subprime housing loans outstanding (19.2 million of them directly owed by government or government-sponsored agencies), with an unpaid principal amount of $4.6 trillion."

"What we know is that almost 50 percent of all mortgages outstanding in the United States in 2008 were subprime or otherwise deficient and high-risk loans.

The fact that two-thirds of these mortgages were on the balance sheets of government agencies, or firms required to buy them by government regulations, is irrefutable evidence that the government's housing policies were responsible for most of the weak mortgages that became delinquent and defaulted in unprecedented numbers when the housing bubble collapsed.

The tragedy is that the financial crisis continues because Congress misdiagnosed the problem and came up with a 2,000-page "solution" that will only make matters worse."

******

Bush Administration Tried to Reform Freddie and Fannie Five Years Ago
CBS News
February 19, 2009

Karl Rove, “We were briefed as far back as 2001 about the problems with Fannie and Freddie; in fact, we moved aggressively in 2004 to regulate Fannie and Freddie, actually got a bill through the Senate Banking and Finance Committee only to have it filibustered by [Sen.] Chris Dodd.”

Rove said Fannie Mae and Freddie Mac “accelerated their imprudent behavior after we attempted to regulate them. They bought almost as much mortgage debt from 2005 through 2008” as they bought in their first 30 years of their existence.

“In fact, in 2003, when we sent our first members of the Cabinet up to talk about this on Capitol Hill, Barney Frank had a hearing in which they basically beat up everybody we sent up there in pretty vociferous language.

******

Hydra says: (much smaller houses in Canada) "might have something to do with heating costs in Canada. I suspect you find US homes in New England and Wisconsin run smaller than averge, too."

You'd think Canada would have large houses from all that space (almost the entire U.S. homebuilding boom from 1995-06 took place in new neighborhoods and the expansion of newer neighborhoods):

10 states with the biggest houses
October 27, 2011

Six of the 10 states with the biggest homes are in the West, based on the median square footage of homes for sale on Realtor.com in September.

The six Western states among the top 10 with the largest homes are: Utah, Colorado, Wyoming, Montana, Idaho and Washington. Three of the states are in the South: Texas, Georgia and Maryland. One Midwest state is on the top 10 list: South Dakota.

******

And, it should be noted, "the subprime crisis" was not only caused by low income earners buying houses they couldn't really afford, but also by higher income earners buying more expensive houses they couldn't really afford.

--------

http://www.blogger.com/comment.g?blogID=28997633&postID=5194376530719968518