Thursday, May 22, 2014
Novo Livro Sobre a Crise Financeira: House of Debt de Mian e Sufi
Atif Mian and Amir Sufi are convinced that the Great Recession could have been just another ordinary, lowercase recession if the federal government had acted more aggressively to help homeowners by reducing mortgage debts.The two men — economics professors who are part of a new generation of scholars whose work relies on enormous data sets — argue in a new book, “House of Debt,” out this month, that the government misunderstood the deepest recession since the 1930s. They are particularly critical of Timothy Geithner, the former Treasury secretary, and Ben Bernanke, the former Federal Reserve chairman, for focusing on preserving the financial system without addressing what the authors regard as the underlying and more important problem of excessive household debt. They say the recovery remains painfully sluggish as a result.(...)In a series of papers, Mr. Mian and Mr. Sufi gradually developed a theory of the boom and bust. They found evidence that lenders flush with cash had made increasingly risky loans. They found, for example, that lending volumes had risen fastest in areas where average incomes were actually in decline. This process continued until the borrowers started defaulting so quickly that the risks became impossible to ignore, and the loans dried up.When housing prices crashed, people lost their equity, but their debts did not disappear. They cut back on consumption, and the economy fell into recession. And, importantly, the households with the largest debt burdens cut back the most. Mr. Sufi and Mr. Mian found that for every $10,000 decline in home values, families with high debt burdens reduced spending on autos by $300, while families with low debt burdens reduced spending on autos by just $100.The housing crash, in other words, took away the greatest share of wealth from the part of the population that had been most likely to spend it. The point, Mr. Mian and Mr. Sufi said, was that the economy had crashed the financial system.The Obama administration considered several ways to reduce mortgage debts during the heart of the crisis. It promised to pursue a few, too, including empowering bankruptcy courts to forgive debts, paying lenders and buying up loans. But ultimately, the administration adopted a limited aid program and gambled that an economic recovery would take care of the problem. Mr. Mian and Mr. Sufi are not particular about which method of reducing debt would have been best; their point is simply that the government, by failing to do more, inhibited the recovery.