According to The Wall Street Journal central banks are using different tools to curb lending t o the housing sector. In South Korea Goverment curbed real-state lending after prices increased 25% a
year.In Toronto housing prices reversed their upward course, when Government increased monthly
payments in new loans.
Central bankers everywhere else are watching these experiments closely, among them Ben Bernanke, chairman of the U.S. Federal Reserve. He and his counterparts around the world, seared by the worst financial crisis in 75 years, are searching for ways to halt borrowing binges before they morph into bubbles, and to push lenders to shore up their defenses before the next crisis arrives.
"Lifting interest rates to discourage borrowing has long been considered a blunt but effective weapon. But that isn't a step central banks are eager to take when inflation is low or unemployment is high—as they are in many places now.
year.In Toronto housing prices reversed their upward course, when Government increased monthly
payments in new loans.
Central bankers everywhere else are watching these experiments closely, among them Ben Bernanke, chairman of the U.S. Federal Reserve. He and his counterparts around the world, seared by the worst financial crisis in 75 years, are searching for ways to halt borrowing binges before they morph into bubbles, and to push lenders to shore up their defenses before the next crisis arrives.
"Lifting interest rates to discourage borrowing has long been considered a blunt but effective weapon. But that isn't a step central banks are eager to take when inflation is low or unemployment is high—as they are in many places now.
So some central bankers are experimenting with targeting only pockets of financial excess. Because financial bubbles so often involve real estate—and because that sector was at the center of the last crisis—many are focusing on ways to control booms in housing prices by curbing mortgage lending.
The point of the new tools is to protect the entire financial system and economy, so economists refer to them as macroprudential. That distinguishes them from microprudential, which describes traditional oversight to assure safety and soundness of individual banks.
At the moment, such concerns are largely hypothetical for the U.S., Europe and Japan. Their central banks, for now, are trying to encourage more lending. But the Fed's pledge to keep interest rates low for a long time—as long as unemployment remains high and inflation low—has already fueled the return of some of the types of risky lending that preceded the 2008 crisis".
