2008-05-22wsj.com

When the headlines are not focused on the "banking crisis," they are fixated on the dramatic decline in home prices – more than 20% from peak levels in some major markets. At the risk of being politically incorrect, I'm not sure why we are upset about a 20%-off sale in housing.

After years of double-digit increases, housing prices in the city in which I live, Sarasota, Fla., jumped an astonishing 35% in 2005 – an unsustainable rate of increase that was pushing housing prices beyond the reach of far too many people. We really needed our housing markets to cool down quite substantially.

Millions of people – particularly the young – will benefit from a significant reduction in housing prices. While those who purchased homes in the past couple of years are unhappy if their investment is under water, the housing markets will be back for those who are able to hang on – with help from their lenders where appropriate. Congress's $300 billion "rescue" plan notwithstanding, the good news is that we have a lot of housing stock at more affordable prices for our growing population.

Lots of good points made in this article (most of which are pretty familiar to our regular readers). As for this one:

We have been told in headlines that we are in the midst of the worst banking crisis since the Great Depression. If there is a banking crisis, I have seen no evidence of it.

I can count on my fingers and toes every sizable bank about which I have had any concern during the past year. In the early 1980s, when I was chairman of the Federal Deposit Insurance Corp., it was far easier to count the major banks that were not in trouble. Virtually every major bank in the country would have failed in 1984 had a couple of developing countries renounced their debts, which the FDIC considered a distinct possibility.

Give it time...



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