Alex J. Pollock is a resident fellow at the American Enterprise Institute (AEI), where he studies and writes about housing finance; government-sponsored enterprises, including Fannie Mae, Freddie Mac, and the Federal Home Loan Banks; retirement finance; and banking and central banks. He also works on corporate governance and accounting standards issues.
Pollock has had a 35-year career in banking and was president and CEO of the Federal Home Loan Bank of Chicago for more than 12 years immediately before joining AEI. A prolific writer, he has written numerous articles on financial systems and is the author of the book “Boom and Bust: Financial Cycles and Human Prosperity” (AEI Press, 2011). He has also created a one-page mortgage form to help borrowers understand their mortgage obligations.
The lead director of CME Group, Pollock is also a director of the Great Lakes Higher Education Corporation and the chairman of the board of the Great Books Foundation. He is a past president of the International Union for Housing Finance.
He has an M.P.A. in international relations from Princeton University, an M.A. in philosophy from the University of Chicago, and a B.A. from Williams College.
The IUHF’s purpose is to provide knowledge, information and understanding about housing finance systems in varying economic, financial, and political contexts, and to compare each of our own narrow institutional assumptions to a broader international perspective, so that we may mutually learn from multiple experiences, experiments, problems, disasters, successes, and innovations.
Housing finance in the United States over the last one hundred years can be divided into three eras: The age of savings and loan institutions (1914-1980), the age of Fannie Mae and Freddie Mac (1980-2008), and the As-Yet Undefined Age (2008-future).
As shown by these recent quotes from The Wall Street Journal, we are getting used to the idea that interest rates can be negative. So why did so many economists assert confidently for years that nominal interest rates could not go below zero– that there was a “zero bound,” as they said?
Perhaps the Fed’s hyper-expanded balance sheet gamble and credit allocation will be judged by future historians as a success. This is a matter of uncertainty. I’d guess the chances are less than 50 percent. On the other side, after the asset inflations end, I’d guess is that there is a greater than 50 percent chance that the historians of the future will give the post-crisis Fed a Bronx cheer.
When faced with uncertainty, we instinctively find comfort when our opinions and actions agree with those we respect. In short, a prudent banker is one who goes broke when everybody else goes broke! As long as prudence in practice means doing what other people do, both as bankers and regulators, periodic crises are inevitable.
The list of the 25 biggest S&Ls in America in 1983, just three decades ago, contains many names which were famous in housing finance circles in those days. How many do you think still exist? Make your guess before you read the answer.
There is nothing in the least surprising about the failure and bailout of Banco Espírito Santo in Portugal. Anyone who has seen a few financial crises knows that one of their typical occurrences is for central banks and governments to offer assurances that things are all right, when in fact a disaster is approaching.
Howard Davies says that “overseeing future risks requires greater exercise of judgment”. True enough. But the real problem is not “overseeing” the risks of the future, it is seeing them – or more precisely, imagining them.