At this event, our panel of experts will share their thoughts on Bubble Trouble.

To make financial markets less vulnerable to their inevitable cycles, it is an essential responsibility of both private financial actors and government officials to study, develop and implement countercyclical approaches.

As the United States approaches the bottom of the housing bust, American Enterprise Institute (AEI) housing expert Alex Pollock explains in a recently published piece that there are seven necessary steps to avoid another housing collapse.

The housing finance system of the future needs to have countercyclical factors built into it and much bigger loan loss reserves in good times to avoid the illusory profits which feed booms and bubbles.

The fat years of the housing bubble lasted from 1999 to 2006 - seven years. The bubble was deflating by the beginning of 2007 and collapsed into the panics of 2007-09. Since then we have been struggling in its deflated wake. If we get the Biblical sum of seven lean years, the housing and related debt markets will bottom in 2013 - not a bad forecast. 

At this event, panelists discussed how to prevent the next real estate bubble.

Reform focused on sustainable lending would have FHA target a projected average claim rate of 5 per 100 insured loans under normal circumstances and 10 per 100 insured loans under stress circumstances.  This rate is about five times the normal default level for prime loans and about half the FHA's traditional default level under normal circumstances.

In less than twenty-five years, government “affordable housing” and other housing policies have turned a healthy market into a financial ruin. Until Fannie and Freddie’s market dominance and the government’s role in the housing finance system are substantially reduced or eliminated, the United States will continue to have an inferior and unstable housing market.