Financial Coup d'Etat: A Simple, Credible Explanation of What Happened (and Some Ideas About How to Fix It)

Here is an excerpt from the transcript of Bill Moyer's Journal of January 8, 2010.

"Thanks to taxpayers like you who generously bailed banking from the financial shipwreck it created for itself and for us, by the end of 2009 the industry's compensation pool reached nearly $200 billion. And despite windfall profits, the banks will claim almost $80 billion in tax deductions. And nearly $20 billion of those deductions will go to just three institutions — Morgan Stanley, JP Morgan Chase, and Goldman Sachs.

Ah, yes — Goldman Sachs, that paragon of profit and probity — which bet big on the housing bubble and when it popped — presto! — converted itself from an investment firm into a bank so it could get your bailout money. Now consider this: in 2008, Goldman Sachs paid an effective tax rate of just one percent. I'm not making that up — one percent! — while their CEO Lloyd Blankfein pulled down over $40 million. That's God's work, if you can get it. And, believe me, Wall Street bankers know how to get it..."

You can read the full transcript, and watch the video of his show here.

The links for part two and his summary are in the title bar above the video screen.

If you find this to be worthwhile, send a copy of this to everyone you know who might be interested in this.

Obama Administration Wants to Annuitize 401k's and IRA's - Mandatory "R Bonds"

As a rule of thumb, the worst possible time to convert lump sum savings into a fixed income annuity would be when interest rates are historically low.

Although products may vary, this is roughly equivalent to buying long term bonds at a time when interest rates are likely to increase, substantially reducing your principal in real terms, and eroding your fixed returns through inflation.

For some reason the Obama Administration is promoting the idea now that there should be some encouragement for Americans to start converting their 401K's and IRA's into annuities, to provide themselves with lifetime income.

The effort is being spear-headed by Mark Iwry of the Treasury and Phyllis Borzi of the Department of Labor. Here is a paper written on the subject by Mark Iwry when he was at the Brookings Institution.

The essence of this paper is that distributions from IRA's and 401K's would automatically be rolled into an annuity providing a monthly income by default.

This concept is known on the Street as the handling fees for meager returns pork barrel pigfest. The Fed likes it because they will undoubtedly get a two year rolling chunk of the people's retirement cash to play with.

Perhaps just rolling those 401K's and IRA's into Social Security or the Long Bond would be what they have in mind. Somehow the panacea of TIPS with inflation defined by the government sounds probable. The drawback perhaps is that this would not generate the highest recurring fees for Wall Street and the FIRE sector, which have to be eyeing that 'cash on the sidelines' hungrily.

How about Patriot Bonds that are fully invested in Mortgage Debt formerly owned by the Fed, with some tranches of Commercial Real Estate to add some zest to the recipe? The Treasury can give this option a small tax break, which can be largely consumed by Wall Street fees and mispricing of risk returns.

And I thought that Greenspan's advice for homeowners to step into ARMs into the knee of the housing bubble was foul.

Here's a modest proposal. Raise the amount of losses from investments that can be deducted from income in one year from $3,000 to $20,000 for individuals and $40,000 filing jointly so mom and pop can clean up their balance sheets. And if they really want to jump start the economy, declare a tax and penalty exemption on the first $150,000 that an individual can withdraw from their IRA or 401K in 2010.

And for God's sake fix the Alternative Minimum Tax levels.

Does it seems as though I have barely given this annuitization effort a chance, a fair hearing, the benefit of the doubt, improperly assumed it might not have the best intentions of the American public at heart?

Are you serious? After Healthcare Reform and TARP? These people in Washington and Wall Street have no shame, much less good intentions, common sense, or a conscience. They are strangling the real economy, slowly but surely.

My model for thinking about this annuitization is that the government wishes to appropriate your savings for a 2.0% return, ex fees and mispriced risk and inflation, as a source of funding for the bailouts of an oversized and insolvent FIRE sector (like AIG) and the imploding pretensions of a global financial elite.

"Officials in the Obama administration are moving quickly to develop the investment infrastructure behind the president’s proposal for mandatory automatic enrollment in individual retirement accounts, which could be supported by the creation of Treasury-issued retirement bonds

J. Mark Iwry, deputy assistant secretary for retirement and health policy at the Department of the Treasury, said that administration officials are exploring some “conservative” options for investing the assets of 78 million Americans that he estimates could be automatically en¬rolled in this “universal” workplace retirement system.

He said that officials have discussed the possibility of making a low-risk life-cycle or target date fund the default investment option for these auto-IRAs, which would be mandatory for employers if they don’t offer a retirement plan to their workers.

But there is also a chance that they could rely on a new form of bond — an “R bond” — as the basic building block for the auto-IRA, Mr. Iwry said in addressing reporters at the Treasury Department in Washington last week.

Administration officials are discussing the exact details of these R bonds, such as their interest rates, maturities and minimums, he noted. These bonds ideally would provide individuals with a source of secure, steady returns that would protect their initial investments."

Administration Explores R Bond For Retirement Accounts - Investment News 7 June 2009

Why have a separate "R Bond" instead of those government bonds they have now called 'Treasuries?' And why have a mandatory universal retirement system when you have this thing called 'Social Security?' Think about it. Sounds like the kind of preparations governments make for things like 'new dollars' after a selective default.

Instead of "Yes We Can" the slogan for the Obama Administration should be "Over One Million Fat Cats Served." And the only difference in the Republicans is the breed of the fat cats whose desires they seek to fulfill. The public has lost its advocacy in Washington, and therefore the integrity of the democratic republic is in peril.

The banks must be restrained, and the financial system reformed, and the economy brought back into balance, before there can be a sustained recovery.

"None are so hopelessly enslaved as those who falsely believe they are free." Johann Wolfgang von Goethe

Bloomberg
Retiree Annuities May Be Promoted by Obama Aides
By Theo Francis

The government is looking at ways to promote the conversion of 401(k)s and IRAs into steady payment streams after a significant decline in plan balances

(Bloomberg) — The Obama administration is weighing how the government can encourage workers to turn their savings into guaranteed income streams following a collapse in retiree accounts when the stock market plunged.

The U.S. Treasury and Labor Departments will ask for public comment as soon as next week on ways to promote the conversion of 401(k) savings and Individual Retirement Accounts into annuities or other steady payment streams, according to Assistant Labor Secretary Phyllis C. Borzi and Deputy Assistant Treasury Secretary Mark Iwry, who are spearheading the effort.

Annuities generally guarantee income until the retiree's death, and often that of a surviving spouse as well. They are designed to protect against the risk that retirees outlive their savings, a danger made clear by market losses suffered by older Americans over the last year, David Certner, legislative counsel for AARP, said in an interview.

"There's a real desire on a lot of people's parts to try to encourage something other than just rolling over a lump sum, to make sure this money will actually last a lifetime," said Certner, legislative counsel for Washington-based AARP, the biggest U.S. advocacy group for retirees.

Promoting annuities may benefit companies that provide them through employers, including ING Groep NV (INGA:NA) and Prudential Financial Inc. (PRU), or sell them directly to individuals, such as American International Group Inc. (AIG), the insurer that has received $182.3 billion in government aid...

Positive Non-Farm Payrolls Number Baked Into Stock Prices?

Everyone appears to be expecting a big upside surprise in the jobs report tomorrow.

Unless its quite a surprise they might even sell the news.

This is a thin market, and probably manipulated as part of a reflationary effort.

Seems like gambling to take much of a position ahead of the release..

Speaking of gambling, here is Simon Johnson on why The Worst Is Yet to Come.

There Are Now More Government Employees than Goods-Producing Workers in the US

For the first time there are decidedly more government employees than goods-producing (manufacturing) employees in the US according to the Department of Labor.



This chart is from The Mess That Greenspan Made here.

It is interesting to think about this in terms of health care, pension plans, job security, employee loyalty, and so forth.

The reason for this is not the growth of government jobs but rather the drastic shrinkage in US based manufacturing employment while government employment remains resilient. As a percent of the population, the number of government employees is now about 9% which is slightly lower than it was in the 1970's.

The Service sector dominates. There is a nice chart showing goods-producing, government, service, and non-employed percentages from EconomPicData here.

US corporations have been offshoring jobs for many years, in part due to the structural problems of benefits and environmental costs in a developed nation and Asian mercantilism. Some of this transfer of employee is due to natural market forces, but a great deal of it is a result of purposeful national policy and trade practices such as currency pegs, for example.

As Adam Smith observed in Wealth of Nations (1776):

"To found a great empire for the sole purpose of raising ... customers may at first sight appear a project fit only for a nation of shopkeepers. It is, however, a project altogether unfit for a nation of shopkeepers; but extremely fit for a nation whose government is influenced by shopkeepers."

In this case if one substitutes "kleptocrats" for "shopkeepers" and "dollar debt slaves" for "customers" then the quotation may fit the current situation in the US and its reserve currency empire quite well. It also helps to explain the steady role of the government bureaucracy in administering this paper empire, as well as the outsized financial sector.

But one underestimates the resilience of a free people at their peril, as did Napoleon dismissing the English, echoing Smith, "L'Angleterre est une nation de boutiquiers," prior, of course, to his Waterloo in June, 1815.

December 2009 Non-Farm Payrolls Report Preview and Forecast

As you may know, and as we suggested the other day, the ADP report, based on payroll data from American business, showed a loss of 84,000 jobs in December, versus expectations of a loss of only 75,000 jobs.

We also suggested that this Friday's US Non-Farm Payroll Report will be a positive surprise, at least 10,000 or so jobs to the good. Here are the details.

The Imaginary Jobs component, also known as the Bureau of Labor Statistics Birth-Death Model, will contribute approximately 72,000 jobs allegedly created by small businesses with less credible evidence than a Bigfoot or an Elvis sighting.

Not that they are always positive. Each January there is an enormous job loss shown here, in the neighborhood of about 350,000 jobs. The reason they do this is because the seasonal adjustment factor is so huge in January that this imaginary jobs number does not matter, since it is subtracted (and added) from the numbers prior to the seasonal adjustment.

We can expect this model to continue to show positive annual jobs growth until the End of Days, and perhaps longer than that if there is fireproof paper in the afterlife.



The 'headline jobs number' which is the Seasonally Adjusted Number will be a positive 58,000 jobs, and provide much joy and exultation in Washington and on Wall Street. Pundits like Paul Krugman will caution that the economy is still fragile and a second stimulus bill will be required to insure these positive gains.



What is the basis for these projected numbers? The same basis used by the BLS - nothing. At least nothing connected with the real world. These are the numbers that bureaucrats might mindlessly crank out in response to the desire of their bosses for certain targets, a phenomenon well understood by most corporate financial staffs.

We drew the trendline on that chart earlier this year, assuming that the government would wish to show a steady job increase with a positive number by December, or at least January. So far we have not been disappointed, although there have been quite a few revisions along the way.

There will also be revisions this time again, with some jobs added and borrowed from prior months to help make this latest number seem believable.



So, let's see how it really turns out. Am I being too cynical? I used to spend many hours estimating these numbers and potential targets, but this month I decided to go with the trends. Not trends in job growth, but trends in the general corruption of nearly all financial and economic data in the US, from the government, the banks, and the kleptocracy.

Perhaps the numbers will be realistic and credible this time, and I can be pleasantly surprised.

And perhaps the Obama Administration will begin to deliver the promised, genuine financial reforms.

Three Charts: Gold, Silver, Dollar

It will be interesting to see how the Fed and Treasury juggle the various markets that do not play well together, being stocks, dollar, and Treasuries, and of course those nasty reminders of dollar mortality, gold and silver. Although the ADP report tomorrow may be a bit light, we think the BLS will do its duty and show us a jobs positive report on Friday.

Gold Daily

The objective for gold is obviously to break back above its 40 day moving average, and take out 1140. The bear are defending this area with a vengance, shorting every rally.



Silver Daily

If silver can take out 18.40 it's off to the races and a new high.



US Dollar (DX) Daily

The dollar needs to take out 78.50 to label this rally as more than a dead cat bounce and keep going. If it takes out 77 and the moving average to the downside then we are looking at a key support test at 76.




US Dollar Commitments of Traders

Dollar is severely overbought by the funds and specs.



h/t jsmineset for the COT dollar chart

Whitney Cuts Goldman Sachs Earnings Estimate

This took a bit of the edge off the rally led by financials and tech today.

Goldman is a strong bellwether for the US financial markets, since they make most of their earnings by ravaging all participants in them. While the fish can still swim, so the squid can feed. So like it or not, as Goldman goes, so the US equity market probably goes, at least in the short term.

It will take all their resources to keep the winning streak intact.

Barrons
GS: Whitney Cuts Q4, ‘10 Estimate
By Tiernan Ray

Joining the string of Goldman Sachs (GS) estimate cuts, Meredith Whitney Advisory Group today lowered its EPS estimate for Q4 from $6 to $5.50, though that’s still above the $5.42 average estimate.

For this year, Whitney lowered her estimate to $19.20 from $19.65, though that’s above the average $18.78 estimate.Previously: GS: Pali Cuts Estimates on TradingJoining the string of Goldman Sachs (GS) estimate cuts, Meredith Whitney Advisory Group today lowered the EPS estimate for Goldman’s Q4 from $6 to $5.50, though that’s still above the $5.42 average estimate.

For this year, Whitney lowered her estimate to $19.20 from $19.65, though that’s above the average $18.78 estimate.

Class Warfare American Style

Matt Taibbi's reaction to the ZeroHedge story with regard to Turbo Tim's lifting of the government support on Christmas Eve for the GSE's was exactly my own. You can read it in its entirety here.

What he does not overtly say is that this is class warfare, and it is becoming worse in the US than at any time since the 1930's. And the outcome of this will be a fundamental test of the US commitment to its republic.

The media stokes the viewing public into emotionally-based and virulently distracting arguments about liberal versus conservative, while the gentried class skins them all alive.

One only has to watch the 'news shows' on American television to see the lack of real content and discussion, with diametrically opposed 'strategists' hurling sound bytes at each other with all the depth of a schoolyard standoff.

It is comfortable to retreat into an 'us versus them' view of the world, and the noble class in the States is all too ready to facilitate that appeal to the darker emotions. People know deep down that it is a scam, and believe that it is easier to go along and get yours while you can, than actually attempting to change a system grown corrupt in an aging empire.

This explains more than one might imagine. Why do the economists continually excuse outrageously unsustainable economic behaviour and financial systems that are as productive as games of chance? Why do some media outlets obviously take sides and pander to the worst biases in their viewers, supplying them with easy reflexive answers to any suggestion that something might actually be wrong? Why do adult people fall for this and regress to childish name calling so readily?

It is because they are afraid. They know the system is broken, that the country is in for hard times, and that the work of reform is going to be difficult and painful. It is so easy to adopt whatever red or blue meme, whomever you think is going to deliver undeserved wealth to you, or at least safety and position. As always look for a fallguy, some identifiable and out of favor group. The search for scapegoats may be be violent.

At turning points such as these, when the time is right, a 'great man' will stand up and many will follow. Who will it be, and what principals and principles will they represent? Obama was such a one, but he is obviously like the character of Robert the Bruce in the movie Braveheart, who chooses practically and cynically to support the nobles. He is finished; no one will follow him as his betrayal becomes too painfully obvious. Will it be the banal fascist with the simplistic, easy answers, a leftist with retribution to offer, or a real 'braveheart' who has nothing more to offer than the hardship of freedom?" 

America is not alone in this. The UK is further along the path. We may see the first expression of the future of the West in London than in Washington. Only the future will tell.

"There's class warfare, all right, but it's my class, the rich class, that's making war, and we're winning." Warren Buffett New York Times, November 26, 2006.

"The class warfare is over -- we lost. I want to make that announcement today. Working people lost. The middle class lost." Dennis Kucinich, 18 December 2009

And in the short term there will be quite a bit of jostling at the middle of the ladder, by those who fancy themselves, or their children, suited for the new nobility and so seek to perpetuate the status quo, with a lot of kicking and dog eat dog going on at the lower levels as the ladder shortens, trying to knock the immigrant, the less connected, off into the abyss, to feed the beast.

Out of all of this will come something different, and most likely something unexpected. Its an old story, one that replays over and over. The remedy is sound reason and the Constitution, but these forces have been in retreat for the past ten years at least. Reform and justice have few friends while the looting of a generation is in progress.

"For what we’ve learned in the last few years as one scandal after another spilled onto the front pages is that the bubble economies of the last two decades were not merely monstrous Ponzi schemes that destroyed trillions in wealth while making a small handful of people rich. They were also a profound expression of the fundamentally criminal nature of our political system, in which state power/largess and the private pursuit of (mostly short-term) profit were brilliantly fused in a kind of ongoing theft scheme that sought to instant-cannibalize all the wealth America had stored up during its postwar glory, in the process keeping politicians in office and bankers in beach homes while continually moving the increasingly inevitable disaster to the future.

That is a terrible story and it is also sort of a taboo story, since we don’t really have a system of media now that is willing or even able to digest that dark and complicated truth. Instead, our media — which has always been at best an inadvertent accomplice to these messes — is basically set up to take every revelation about the underlying truth and split it down the middle, feeding half to one side of the political spectrum and one half to the other, where the actual point is then burned up in the useless smoke of a blame game.

The essentially complicit nature of the two ruling political parties was in this way covered up for decades, as the crimes of the Democrats were greedily consumed as entertainment by the Limbaugh crowd while the crimes of the Bushies became hot-selling t-shirts and bumper stickers for the Air America listenership. The abiding mutual hatred the red/blue groups shared consistently prevented any kind of collective realization about the structure of the overall scheme...

Everyone had a hand in the bubble, from the congressmen who killed regulatory initiatives to the regulators who snoozed at the wheel to the GSEs to the Fed to the banks to the ratings agencies to the lenders. I don’t think it’s really controversial to say that, but it does seem like there’s an argument brewing about what that across-the-board complicity means.

My own personal feeling is that our recent bubbles weren’t much different than pyramid scams and lotteries; they’re the handiwork of an essentially regressive and deeply cynical political organization that systematically hoovers up taxes and investment money mainly from middle-class suckers, where it eventually gets eaten in short-term cashouts and mostly blown on sports cars and tropical vacations and eye jobs for the trophy wives of Wall Street executives. Crackonomics: take literally all the spare money from four square city blocks and turn it into one tricked-out Escalade.

For me the basic dynamic of the mortgage bubble is some Ivy League dickwad hawking a billion dollars of securitized subprime mortgages to a pension fund, and then Hobie-sailing off into the sunset with a bonus after they all blow up. Of course my seeing it that way might have a lot to do with my own personal psychological prejudices, and I get that some other person with different hangups might choose to focus on Barney Frank deciding to “roll the dice on home ownership” with the GSEs...

This GSE story is a big one, but if it gets used as a path back to a “The Market Reacted Rationally” version of history, we’re screwed. It has to be looked at as an important part of a diabolical whole, a symbiotic scheme in which the banks and the state were irreversibly intertwined in an enterprise that on both sides was never about market economics, but crime. Because otherwise… the diversionary notion that one side or the other is wholly to blame is part of what makes the whole scam possible..."

Why would you care? Why be concerned about the other? Because when the time comes, there may be no place to hide. Madness makes few rational distinctions between what is and is not worth preserving. Time to listen to the survivors, and not imagine that this time it will be different.

"First they came for the intellectuals, and I did not speak out—because I was not a intellectual;
Then they came for the communists, and I did not speak out-because i was not a communist;
Then they came for the trade unionists, and I did not speak out—because I was not a working man;
Then they came for the disabled, and I did not speak out—because I was not disabled;
Then they came for the gypsies, and I did not speak out—because I was not a gypsy;
Then they came for the Catholics, and I did not speak out—because I was a Protestant;
Then they came for the Jews, and I did not speak out—because I was not a Jew;
Then they came for me —
and there was no one left to speak out for me."

Why Was There No Canadian Housing Bust? The US Fed Says That They Were Probably Just Lucky Except...

This paper from the Cleveland Fed, which used to shine under the governorship of Jerry Jordan, suggests several reasons why there was no significant housing bust in Canada. Interesting that after each politically correct reason stated, there is an 'oh-by- the-way' in addition that cuts to the heart of the problem.

The Canadians were probably just lucky, according to the Fed, except they actually did things to stem the growth of off-balance-sheet securitization and tightened lending standards earlier on while the US Fed was cheerleading banking speculation and the growing housing bubble even to the point of its collapse.

Chairman Ben struck the party line in a recent speech, blaming the regulators. But in fact the Fed had a significant role to play in both regulation, monetary policy, and in the verbage they put out attacking regulation of banks and enabling their off-balance-sheet vehicles and derivatives speculation at every turn.

Yes, Fannie and Freddie played a significant role in the US. But the Fed set the tone for banking regulation and they not only did not take away the punch bowl, they spiked it with high grain alcohol. The Fed was the 'cop on the beat' and they looked the other way. And they still are.

The Wall Street banks bought the White House, the Congress, and already owned the Fed. It was a failure of stewardship in the US that allowed the bubble then, and the continuing abuses on Wall Street today. And while the US Fed is not the sole perpetrator, it was their duty as the "independent regulator" to take away the punch bowl. And they never did it. And have not done it yet.

From the charts, it is obvious that there is a bubble in Canadian housing, not of the dimensions of the US, but likely a bubble nonetheless. The bubble is partly due to Canada's heavy export involvement with the US, and a certain interdependency implied with the devaluing dollar, and a desire to keep the loon at par with the dollar. The key difference between the nature of their bubble is that it is not founded on the fraudulent securitization of mortgages held by their commercial banks.

Will the Canadian housing bubble 'pop' or will the Canadians be able to grow out of it gracefully? That is not quite the issue being addressed here. Certainly the Canadian monetary authority and regulators are not exemplary, but certainly less inept then the US Fed, at least so far.

Addendum: Canadian readers are quite concerned about the actions of the Harper government and the CMHC, which is similar to a Canadian version of Fannie Mae apparently. CMHC Bubble 100% Made in Canada Several were kind enough to write in and say that Canadian housing is still overpriced relative to rents, and that the debt held by the CMHC is likely to end in tears at some point. I think the chart of home prices indicates that, but it appears that a gradual decline in activity and pricing is possible, which is the conclusion I believe that the Fed was assuming in their paper. Canadian readers of this blog are not so sanguine, and believe that a collapse will happen.

That is always a possibility. It would take considerably more analysis on my part to determine the size of the debt relative to its servicing, and factor in the possible steps that the government might take to manage that debt relative to homeowners.

But the point I think the Cleveland Fed writer makes is not entirely lost here. So far Canada is holding up rather well. It was a characteristic that interested me because Canada also held up remarkably better than the US during the Great Depression, and the people suffered much less, largely because their banking system was more conservative than the US.

It will be interesting to see how the Canadians deal with this issue going forward. Perhaps they really have just been lucky, and are heading towards a similar fate. But one thing remains that at least for now they have many more policy options than the US, which was taken down hard by its banks, and their propensity to leverage up, mismark risk, and pack it into their balance sheets recklessly. Whether they do the right things now is another matter again.

"Why Was the Subprime Market in Canada Smaller?

Given the key role played by the “subprime” market, the question is why the Canadian subprime market was both smaller and levels of securitization were lower than in the U.S. While it is difficult to disentangle the reasons why Canada avoided the subprime boom, some factors can be identified that may have contributed to the differences in the Canadian and U.S. subprime markets.

Perhaps the simplest story is that Canada was “lucky” to be a late adopter of U.S. innovations rather than an innovator in mortgage finance. While the subprime share of the Canadian market was small, it was growing rapidly prior to the onset of the U.S. subprime crisis. In response to the U.S. crisis, some subprime lenders exited the Canadian market due to difficulties in securing funding. In addition, the Canadian government moved in July 2008 to tighten the standards for mortgage insurance required for high LTV loans originated by federally regulated financial institutions. This further limited the ability of Canadian banks to directly offer subprime-type products to borrowers. (That's quite an oh-by-the-way - Jesse)

There are also several institutional details that played a role. The Canadian market lacks a counterpart to Freddie Mac and Fannie Mae, both of which played a significant role in the growth of securitization in the U.S. In addition, bank capital regulation in Canada treats off-balance sheet vehicles more strictly than the U.S., and the stricter treatment reduces the incentive for Canadian banks to move mortgage loans to off-balance sheet vehicles. (Another significant oh-by-the-way - Jesse)

Finally, as noted above, the fact that the government-mandated mortgage insurance for high LTV loans issued by Canadian banks effectively made it impossible for banks to offer certain subprime products. This likely slowed the growth of the subprime market in Canada, as nonbank intermediaries had to organically grow origination networks.

A Challenge for Policymakers

The Canada-U.S. comparison suggests the low interest rate policy of the central banks in both countries contributed to the housing boom over 2001–2006 and that a relaxation of lending standards in the U.S. was the critical factor in setting the stage for the housing bust. A caveat worth emphasizing, however, is that the Canada-U.S. comparison tells us little about what would have happened if U.S. monetary policy had been tighter earlier. Tighter monetary policy in the early part of the decade may have helped to limit the subprime boom by slowing the rate of house price appreciation over 2002–2006. The Canada-U.S. comparison does, however, highlight the practical challenge facing policymakers in assessing whether a rapid run-up in asset prices is a bubble or a “sustainable” movement in market prices."
Why Didn't Canada's Housing Market Go Bust? - Cleveland Fed

Here is a little more detail on the shenanigans of Tim and Ben by John Hussman.

The banks must be restrained, the financial system reformed, and the economy brought back into balance before there can be a sustained recovery.