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.

What should the objective of financial markets evolution beyond the Dodd-Frank Act be: making markets more robust, or democratizing and humanizing finance?

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.

The Dodd-Frank Act in general, and in particular its favorite child, the Consumer Financial Protection Bureau, represent sharp political disputes, as now with bypassing the Senate by the "recess" appointment of its director. But more fundamentally, they represent clashing political philosophies.

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. 

Capital inflow bonanzas are troublesome for advanced economies, in which they are associated with economic crises, and for emerging markets, in which they contribute to economic vulnerability.

The Shadow Committee believes that several events have undercut the meaningfulness of the Tier 1 capital designation. Because of these problems with the definition of Tier 1 capital ratios, they have provided an unreliable guide to market perceptions of capital adequacy during the financial crisis.