American subsidies are justified as necessary to promote home ownership in the US. Indeed, the rate of home ownership in the US rose to 68 per cent by 2006. Yet, without these governmental subsidies, the rate of home ownership in Canada also rose to 68 per cent in 2006. This comparison suggests that the large American subsidies for home purchases have led to higher home prices in the US rather than significant increases in the rate of US home ownership.

Interview by Tom Hudson. Author Robert Pozen Addresses How to Fix The System.

Transcript available.

The administration could give the big banks a choice — replace your guaranteed debt with newly issued non-guaranteed bonds, or pay the US Treasury $6 billion representing the remaining value of this federal guarantee over the next two years. This would not be a punishment; it would be the fair thing to do for US taxpayers.

If Glass-Steagall were reinstated, we would be recreating the short-term funding weakness that forced Bear Stearns and Lehman Brothers into insolvency.

If the Treasury bails out large banks in the future, it should demand the same terms as those received by sophisticated institutional investors. Some of the rescued banks will become profitable, while others will become insolvent. Taxpayers need to maximize their gains on the successful turnarounds to compensate for their losses on the bailouts that inevitably fail.