He may as well have been responding to my last post. Fed Chairmand Bernanke said yesterday that he does not expect nationalization of banks in the US. That spurred some optimism and demand for stocks, and the Dow Jones rose by 3% even though Bernanke also said the recession is likely to last at least another year.
Another report says that home prices in the US have taken another drop and consumer confidence is lower too. Bernanke was probably taking this into consideration when predicting the extended recession.
Question then–Which would have a more positive effect on the housing market? Banks being held privately? Or under government control?
Held privately, banks are less restricted but also have the option to hoard money. Held publicly, policy makers could push the banks to loan money, but the cost of banking would likely be higher.