Housing Market Solutions: Start by Understanding the Problem

At "A Dash" we find the real experts, focusing on crucial market topics.  Even when trying to enjoy a vacation, we observe and note key topics, adding to our writing agenda.  Newspapers from the Wall Street Journal to USA Today added to the drumbeat of negative sentiment on the economy.

The recession forecasts, mostly by non-economists, got louder and more frequent, as journalists spelled out their views on the housing market.

Discussing this will take a series of articles looking at divergent views, the nature of economic problems, the possible solutions, and the prospects for action.  Market participants, all of whom think they are smarter than anyone in government, do not understand how public policy is formed, especially in complex situations.

We have identified two excellent sources for readers who want real understanding.  It is more than just a "bubble."  There are identifiable public interests in promoting home ownership, diversifying risk, and avoiding massive foreclosures.  The potential losses are much greater than the costs of some action.

What policy might be adopted?

This is the key question, since there will be a number of actions.  It all starts with understanding what happened.

Alan Sloan’s Fortune article provides a good description of structured investment in the mortgage market, readily understandable by anyone.  The potential conflict of interest at Goldman Sachs, much in the current news, is a future topic, but read the article to understand the problem.  It only takes a few minutes.

Our second source shows the value of humor.  It is a great way to grasp the perverse incentives of the system that must be repaired and replaced.  Readers will both understand and enjoy this video from The Two Johns.

With a grasp of the problem, one has the start toward understanding the various proposals for a solution.