As headlines persist that the Dow is going up, down or sideways, I have begun to hear some optimistic comments here and there. One such comment was today by Federal Reserve Bank President Jeffrey Lacker. He was interviewed on CNBC this morning as said the US economy looks dismal in the short term but should return to growth by year end, as the housing markets finally reach some sort of equilibrium.
"I'm expecting a bottom at the end of the year and a little bit of positive growth," Lacker said. "It does seem likely that we're going to see some sort of equilibrium emerge in the housing market in the latter part of the year." He is a voting member of the Federal Open Market Committee in 2009. He said he is fine with the Fed's current stance on monetary policy and expects the fed funds rate to be near zero for some time.
I continue to believe the root of the problem is the housing market and that is where the primary focus from Washington should be. I think the banks need to adapt and quickly rewrite the loans of their clients to keep the people in their homes. The banks do not want to own any more foreclosed properties than they already have. Re-write the loans to a new forty or fifty year loan if that is what needs to be done to make the fully amortized payment a cost the consumer can afford to pay. Let the focus be to keep the consumer in their home.
Sandy