I do not think any special policies are needed to have a stable housing market. All that is needed is rigorous monetary policy, so that people know that they will not be bailed out by lower interest rates if they take on a commitment they cannot fulfil. Look at Germany, Switzerland etc….no boom, no bust. The US is just too soft.

It is definitely much more than $50B. If memory serves right, Goldman Sachs alone had a bonus pool of $16B for 2006 alone. In any case, it may or may not completely fill the hole, but at least some justice would be served. Bailing out BSC and LEH will be a little less reprehensible if ill-gotten bonuses were confiscated to help the taxpayer out.

Twofish: Also, everyone on Wall Street gets bonuses from the CEO to the secretaries. If you claw back bonus payments, you aren’t looking only at top executives.

Ah the old Wall St bogeyman of “don’t do that or the poor secretaries will get hurt”. Thats BS. Let the secretaries or anyone making less than $100k keep their bonuses. We all know that 90% of that bonus pool goes to the fat cats not the secretaries.

Of course congress can ensure that reasonable lending standards are enforced. It can make hence change laws, including the laws that govern GSE regulation. The current law (I read it meanwhile) describes organizations that look pretty different from current reality anyway, so changing the mandate and capacity of the regulator should be easy nothing is not broken and everything needs to be fixed. There are excellent regulators in the rest of the financial system. So perhaps moving the financial oversight (not the social aspect) to say the FED or Treasury would be easy, though politically difficult. But we are outside political reality here anyway

I was interested in what type of responses people would but I seem to have not provoked much creative thinking here.
Housing policy is very simple. Houses are non-tradable and the ratio of stock to production is small. Supply is constrained by zoning and building codes. Demand grows with the population (rather number of households), but is roughly a function of population growth. Demand is strongly constrained by household budgets and the latter has been the problem during the boom, where the market for financing seemed to offer no constraints whatsoever for many groups, including ones previously almost excluded.

What one needs is a housing market where the cost of home ownership is made more predictable (for instance the existing house price stays closer to a trend, the trend picks up somewhere in the average of the past five years and simply tracks a composite of building cost and CP indices. Interest rates for mortgages originated for the -not de jure but de facto nationalized- housing finance system could be administered ones, with a gradual phase-out of the old prepayable fixed rate system (which exist virtually nowhere else). The successor agencies (of all of the current ones, incl GNMA) would set underwriting standards for their own production and production by third parties which they would gurantee. The agencies would fund themselves at treasury-equivalent prices and their annual production (incl guarantees for mortgages funded by others (mainly subsidized, municipalities, charities etc)) would be set by congress which then would control (a) the growth of the stock of federally financed housing (b) the national housing price level. No other mortgage debt would be tax-deductible, except for private investors in rental housing (for which financing would not be guaranteed by the gvt) . The system would lower ex ante yields for fixed income investors and lower borowing costs. It would virtually eliminate speculation and wuld need a properly aligned land release and zoning policy, but that should not least to measurble costs (in public accounting terms) either. This would create room for the government to gradually reduce the tax deduction of interest (a powerful incentive to excessive consumption of housing) and redeploy those funds to the social security system, a more efficient locus for subsidizing households. Reasonable economics, bad politics, specially in the dysfunctional US of A

Normal civilian taxpayers and most businesses would like that too.

Can’t comment on the SEC’s and Fed’s link between pay/talent and performance. That would take a study beyond my means to come up with any defensible conclusions.

Not to say that we could do without regulation, of course.

More like $50 billion, which isn’t nearly enough to cover the hole even if you take it all. Also, everyone on Wall Street gets bonuses from the CEO to the secretaries. If you claw back bonus payments, you aren’t looking only at top executives.

pseudorandom: The IRS has some fine accountants too. Let them fight it out. At least make the useless financial parasites work for it a little.

Actually no. The problem with IRS and regulators is that sense you make more money in industry than in government, the better tax attorneys and accountants end up in industry rather in government, and in any case what happens is up to Congress. If the political heat gets high enough Congress will pass something that takes a lot of income from top executives, followed the next day by people redefining income and top executive.

In order to fix that you need to boost salaries. Part of the reason that the Fed and the SEC do very well at regulation is that they aren’t subject to the normal civil service restrictions on salaries and so they can pay for talent.

Nonsense. What was the total bonus payments on Wall St between 2003-2006? Something like $200B? How about clawing back some of the bonuses that were based on bogus valuations that had to be later written down?

Twofish: 2) the day after you pass those taxes, you’ll find tax attorneys with very clever ways of getting around those taxes.

The IRS has some fine accountants too. Let them fight it out. At least make the useless financial parasites work for it a little.

They may have wives, kids, and grandkids. I would hate to see them just move to Monte Carlo and avoid our fate.

The trouble is that 1) you won’t raise that much money and 2) the day after you pass those taxes, you’ll find tax attorneys with very clever ways of getting around those taxes.