December 7, 2011

Mr. Dennis P. Lockhart, President and Chief Executive Officer
Federal Reserve Bank of Atlanta
1000 Peachtree Street NE Atlanta, GA 30309-4470

Dear President Lockhart:

Please allow me to introduce myself. I am the Chief Economist with Strategas Research Partners. Strategas is an economic and investment strategy firm with offices in New York and Washington, D.C. For the past 2lh years I have been involved with the "Redfields to Greenfields" program, also based in Washington, D.C. The program has centered around the idea that a core problem in the U.S. economy is that we have too much of the nation's wealth tied up in unproductive real estate. The goal has been to try and address this issue, with a . combination of inputs from the financial community, government, and those individuals and agencies involved with real estate and land management in the u.s.

I have always been struck with the symmetry that the economy has tended to exhibit. Sharper downturns have typically been followed by sharper upturns, as many economic researchers have noted. What strikes me as particularly problematic about the current state of the u.s. data is how little symmetry we have seen during this recovery, especially in variables such as employment.

Many believe - as I do - that the housing market has played a key role in this asymmetry. Very few economic charts naturally take a "step-function" shape - but that is precisely what we have in many housing series. Housing starts, housing permits, new home sales, existing home sales, mortgage applications for purchase, and home prices have remained flat at a low level. Downside risks have not been completely removed. We often talk about a "housing bubble," but the real estate market includes both the house and the land underneath the house. The argument that we had a "land bubble" in addition to a "housing bubble" (eg, Robert Shiller, NYT 2/5/2011) is likely an important distinction.

While much has been done in both fiscal and monetary policy to address housing, I think few would argue that the problem has been solved. Of course, this is not the job of the Federal Reserve precisely. But I believe there is enough of a macroeconomic impact to suggest that additional research into unconventional policies is warranted. Many individuals in the "Redfields to Greenfields" program have given considerable time to trying to find a workable solution. No one believes there is a silver bullet. But with excess reserves at banks already elevated, it is as if we've dropped money out of helicopters, and it has all fallen into bank vaults. A policy that helps free up these excess reserves could help boost confidence, support the banking system, and aid the economy.


Donald Rissmiller
Chief Economist
Strategas Research Partners
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