The candidates in last night's GOP debate had plenty to say about housing. Rand Paul started it off in his answer to a question about income inequality, where he expressed disapproval of Federal Reserve policies, and from there it was a free-for-all on housing, regulators and banks.
The fourth Republican debate, hosted by the Fox Business Network and The Wall Street Journal, was moderated by Neil Cavuto, Maria Bartiromo and Gerard Baker, editor-in-chief of the Wall Street Journal. The candidates at the 9 p.m. debate were Donald J. Trump, Ben Carson, Sen. Marco Rubio, Jeb Bush, Sen. Ted Cruz, Carly Fiorina, Gov. John Kasich and Sen. Rand Paul.
Here's a round-up of what each candidate had to say on topics related to housing and the housing economy. When necessary for clarity we've added the question, but the responses below are from a variety of questions aggregated under each topic.
THE FEDERAL RESERVE:
Paul: (Question about income inequality) But I would also say — lay some blame at the — the feet of the Federal Reserve. I think the Federal Reserve has made this problem worse. By artificially keeping interest rates below the market rate, average ordinary citizens have a tough time earning interest, have a tough time making money. They’re actually talking now about negative interest.
The money as it’s created through quantitative easing or other means tends to start out in the big banks in New York. And because we’re now paying interest for them to keep the money there, much of that money has not filtered out into the economy. So what we’re finding is there is increasing income disparity and income inequality.
We also find that as the Federal Reserve destroys the value of the currency, what you’re finding is that, if you’re poor, if you make $20,000 a year and you have three or four kids, and you’re trying to get by, as your prices rise or as the value of the dollar shrinks, these are the people that are hurt the worst.
So really we need to reexamine whether we not — we want a Federal Reserve that’s involved so much in determining interest rates. We also need to look at root causes as to what caused the housing boom and the housing collapse.
Rubio: Now, let’s be clear, there is a role for the Federal Reserve — what the Fed is doing now is it is a series of philosopher- kings trying to guess what’s happening with the economy. You look at the Fed, one of the reasons we had the financial crash is throughout the 2000s, we had loose money, we had an asset bubble, it drove up the price of real estate, drove up the price of commodities, and then in the third quarter of 2008, the Fed tightened the money and crashed those asset prices, which caused a cascading collapse. That’s why I am supporting getting back to rules-based monetary system not with a bunch of philosopher-kings deciding, but tied…
Kasich: I don’t like what the Fed is doing, but I’ll tell you what worries me more than anything else: turning the Fed over to the Congress of the United States……so they can print the money. That would be a very bad approach.
BAILING OUT BIG BANKS
Bush: We’re not — we shouldn’t have another financial crisis. What we ought to do is raise the capital requirements so banks aren’t too big to fail. Dodd-Frank has actually done the opposite, totally the opposite, where banks now have higher concentration of risk in assets and the capital requirements aren’t high enough. If we were serious about it, we would raise the capital requirements and lessen the load on the community banks and other financial institutions. This vast overreach has created a huge problem for our country, and Hillary Clinton wants to double down on that.
I was in Washington, Iowa, about three months ago talking about how bad Washington, D.C., is... and I talked to a banker there. This is a bank that had $125 million of assets, four branches. Their compliance costs because of Dodd-Frank went from $100,000 to $600,000 in a two-year period. The net effect of that is — and they had — they had not one loan that went bad during the financial crisis. They knew — they knew their borrowers. They gave back to the community. They were engaged in the community. And imagine America without its community banks. Well, that’s what’s happening because of Dodd-Frank. That’s — that’s my worry. My worry is that the real economy has been hurt by the vast overreach of the Obama administration.
(Moderator asks if Bush can guarantee that there won't be another financial crisis) No, I can’t say that. But I can say, if you created higher capital requirements, that’s the solution to this, not having concentration of assets. The bigger banks now have more and more control over — over the financial assets of this country. And that is the wrong approach to take.
Carson: (moderator asks if he thinks big banks should be broken up) Well, I think we should have policies that don’t allow them to just enlarge themselves at the expense of smaller entities. And certainly some of the policies, some of the monetary and Fed policies that we’re using makes it very easy for them, makes it very easy for the big corporations, quite frankly, at these very low interest rates to buy back their stock and to drive the price of that up artificially. Those are the kinds of things that led to the problem in the first place...I would have policies that wouldn’t allow that to occur. I don’t want to go in and tear anybody down. I mean, that doesn’t help us. But what does help us is stop tinkering around the edges and fix the actual problems that exist that are creating the problem in the first place.
And in Dodd-Frank, you have actually codified too big to fail. We have actually created a category of systemically important institutions, and these banks go around bragging about it. You know what they say to people with a wink and a nod? We are so big, we are so important that if we get in trouble, the government has to bail us out. This is an outrage. We need to repeal Dodd-Frank as soon as possible...
You know, the opening question Jerry asked, would you bail out the big banks again? Nobody gave you an answer to that. I’ll give you an answer. Absolutely not.
(Moderator asks if Bank of America were on the brink, would he let it fail?) Yes...So let me be clear. I would not bail them out, but instead of adjusting monetary policy according to whims and getting it wrong over and over again and causing booms and busts, what the Fed should be doing is, number one, keeping our money tied to a stable level of gold, and, number two, serving as a lender of last resort.
That’s what central banks do. So if you have a run on the bank, the Fed can serve as a lender of last resort, but it’s not a bailout. It is a loan at higher interest rates. That’s how central banks have worked.
Kasich: Let me — let me also say, Gary — Gary, let me also say, Jeb is — what Jeb is talking about with the big banks is to force them to reserve their capital, people who invest it and they hold their capital, so that if the bank goes down, the people who are invested in the bank are the ones that pay. That’s what he’s trying to say.
Secondly, I’ll tell you about Wall Street: There’s too much greed. And the fact is, a free enterprise system is a system that’s produced the greatest wealth for the world. But you know Michael Novak, the great Catholic theologian, says that a free enterprise system that is not underlaid with values — and we should all think about the way we conduct our lives — yes, free enterprise is great, profits are great, but there have to be some values that underlay it, and they need a good ethics lesson on Wall Street on a regular basis to keep them in check so we, the people, do not lose...
Neil, that’s the difference of being an executive. And let me just explain: when a bank is ready to go under and depositors are getting ready to lose their life savings, you just don’t say we believe in philosophical concerns...They were — they were talking about what you would do with depositors. Would you let these banks shut down?
My argument is, going forward, the banks have to reserve the capital, so that the — so that the people who own the capital start pressuring the banks to not take these risky approaches, Ted...I would not let the people who put their money in there all go down...As an executive, I would figure out how to separate those people who can afford it versus those people, or the hard-working folks who put those money in those institutions…Let me say another thing. Here’s what I mean by that. Here’s what I mean by that. When you are faced — when you are faced, in the last financial crisis, with banks going under — with banks going under, and people, people who put their — their life savings in there, you got to deal with it. You can’t turn a blind eye to it.
Now, going forward, that’s one thing. If you had another financial crisis, perhaps there would be an effort to make sure that we do.
Carson: And what we’ve done now is let the creep of regulation turn into a stampede of regulations, which is involved in every aspect of our lives. If we can get that out, it makes a big difference. And even for the average person, every single regulation costs money. And it’s shifted to the individual.
Socialism starts when government creates a problem, and then government steps in to solve the problem. Government created the problem.
Government created the problem of a real estate boom. How did we create it? Under Republican and Democrats alike, Fannie Mae and Freddie Mac, everybody gathered together, Republicans and Democrats, and said, “home ownership is part of the American dream. Let’s create a bubble,” and then government stepped in — by the way, under president George W. Bush, banks were told — encouraged — told, really — to buy other banks, to take money.
And now what do we have with Dodd-Frank? The classic of crony capitalism. The big have gotten bigger, 1,590 community banks have gone out of business, and on top of all that, we’ve created something called the Consumer Financial Production Bureau, a vast bureaucracy with no congressional oversight that’s digging through hundreds of millions of your credit records to detect fraud.
This is how socialism starts, ladies and gentlemen. We must take our government back.