South By North Strategies, Ltd.

Writing at Naked Capitalism, Matt Stoller describes the policy debate over housing as a clash between “handcuffs” and “hope and change.”

There are two schools of thought on fixing the housing market.  The first is the Tim Geithner school, which we’ll call the “hope and change” school.  Hope and changers, who occupy most elite positions in the administration, in banks, at the Fed, in the economics establishment in Congress, at housing nonprofits like the Center for Responsible Lending, in regulatory agencies, believe that the housing market will come back when the economy returns.  Foreclosure problems may be tragic, or overblown, or not, but ultimately are incidental to fundamentals, like matching housing supply to demand or increasing employment through boosts in aggregate demand.  Warren Buffett is probably the most famous member of this school.
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The second is the “law and order” or “handcuffs” school, which has (loosely) as members people like former FDIC chief Sheila Bair, former SIGTARP Neil Barofsky, iconoclastic investors such as Bill Frey, foreclosure fraud defense attorneys, Congressional actors like Maxine Waters, criminologists like Bill Black and various securitization experts and bloggers.  The handcuffs believes that law and order is not incidental to the breakdown of the housing market, but is central to it.