The work of our friend David Beckworth on religiosity and the business cycle is featured in the New York Times. Here is an excerpt:
A study last year may lend some credence to the legend. In “Praying for Recession: The Business Cycle and Protestant Religiosity in the United States,” David Beckworth, an assistant professor of economics at Texas State University, looked at long-established trend lines showing the growth of evangelical congregations and the decline of mainline churches and found a more telling detail: During each recession cycle between 1968 and 2004, the rate of growth in evangelical churches jumped by 50 percent. By comparison, mainline Protestant churches continued their decline during recessions, though a bit more slowly.
Read the whole thing.
Our friend David Beckworth writes:
(1) Fannie and Freddie (the GSEs) gained market share beginning in the 1980s from the saving institutions (presumably from the Saving & Loan debacle fall out); (2) Fannie and Freddie lost market share beginning around 2002 to the asset-backed security issuers. As noted by the above observers, this latter point supports the notion that at least some of the problems at Fannie and Freddie emerged in response to their declining market share during the housing boom. In other words, what happened to Fannie and Freddie may have been a symptom rather than a cause of the housing boom-bust cycle.
I have mentioned this before, but it is worth repeating. There is no doubt that Fannie and Freddie have played a role in elevating home prices through the subsidization that followed from the implicit guarantee of their debt by the federal government and their growth over the years. However, their share of the market declined for the better part of this decade as private issuers expanded their presence within this market. It was the pyramid schemes of collateralized debt obligations (CDOs), CDOs comprised solely of CDOs (CDO-squared and subsequently CDO^n), regulatory forbearance (not solely de-regulation), the unbelievable assumptions regarding risk (see here, here, here, and here for a discussion of uncertainty) and credit default swaps, an irrational fear of deflation that caused the Federal Reserve to keep interest rates at historic lows for far too long, etc. that caused the current financial crisis.
Posted in Economic News
Tagged Beckworth, collateralized debt obligations, credit crisis, credit default swaps, de-regulation, deflation, ergodicity, Fannie Mae, Federal Reserve, Freddie Mac, regulatory forbearance, risk and uncertainty