Fed Pres. Fisher Speaks on Housing

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Federal Reserve Bank of Dallas President Richard Fisher spoke in Texas on Wednesday and had some (as usual) comments worthy of note to those watching the housing market carefully:

The central bank’s job isn’t to bail out particular industries, Fisher added. He said he’s "very happy" with the Fed’s stance of leaving interest rates unchanged while keeping inflation as its main concern.

"The damage from the subprime market has been largely contained," Fisher said. "Fortunately, the financial system and the economy are strong enough to weather this storm."

The first comment I agree with – its not the Fed’s job to buoy particular industries through manipulation of the banking system. While one could easily argue that the Fed has a penchant for doing just that is another discussion. (It seems clear that the Greenspan Fed enjoyed building asset bubbles.) This is good news to those who are worried about a government sponsored bail out. Keeping the Fed from artificially keeping this lending cycle going is a step in the right direction.

The second comment while technically true does gloss over some of the damage that this will wreak on the markets and the economy in general for the near-term future.

Finally, I hope he is able to act on his words below and that the Fed and other government/elected officials follow a similar, prudent course:

"By always bearing in mind the potential for policymakers to compound rather than solve problems, the Fed and other regulators are doing their level best to tread very carefully in dealing with the subprime situation," Fisher said.