The ISI Group's Andy Laperriere, writing on the opinion page of yesterday's Wall Street Journal, says the answer is yes (at least in part):
Stock markets world-wide have sold off the past few weeks over concerns the collapse of the subprime mortgage industry could prolong and deepen the housing slump and threaten the health of the U.S. economy. Federal Reserve officials and most economists believe the problems in the subprime mortgage market will remain relatively contained, but there is compelling evidence that the failure of subprime loans may be the start of a painful unwinding of a housing bubble that was fueled by easy money and loose lending practices...
The fact that Congress is now holding hearings on the fallout from the second major asset price bubble in the last decade should prompt some broader questions. For example, what role did the Fed's loose monetary policy from 2002-2004 play in fueling the housing bubble? Should the Federal Reserve reexamine its policy of ignoring asset bubbles?
I know that the easy money claim has become something of a meme, but I often find myself pondering this picture:
What's the story here? That the long string of federal funds rate cuts beginning in January 2001 caused the decline in long-term interest rates -- including mortgage rates -- that commenced a full half-year (at least) before the first move by the FOMC? That low levels of short-term interest rates have kept long-term rates well below their pre-recession peaks? Then what to make of the fact that rates at the longer end of the yield curve have barely budged in the face of a 425 basis point rise in the funds rate target? Maybe it's "long and variable lags"? Should we then be expecting that big jump in long-term rates any day now? I guess it's still a conundrum. But maybe, then, we should be a little circumspect about the finger pointing?
OK, here's part of the Laperriere article I can get behind:
It's not the size of foreclosure losses as a share of the economy that matters, it is the effect those losses have on the availability of credit.