Thursday, March 16, 2006

Brutal Honesty from the Fed

"Homeowners shoud not expect to see all the gains of recent years preserved":

The Federal Reserve has no intention of preserving all of the recent gains in home price values, said Federal Reserve board governor Donald Kohn on Thursday.

"If real estate prices begin to erode, homeowners should not expect to see all the gains of recent years preserved by monetary policy actions,' Kohn said in a speech prepared for delivery to a European Central Bank forum in Frankfurt, Germany.

"The same consideration apply to homeowners: All else being equal, interest rates are higher now than they would be were real estate valuations less lofty; and if real estate prices begin to erode. Homeowners should not expect to see all the gains of recent years preserved by monetary policy actions," Kohn said.
Question: It would be ridiculous to the n-th degree to expect the government to act to preserve gains or losses for people trading in the stock market. Why is housing any different?

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