Housing Bubble Was Whose Fault? Not the Fed's, Says New Study


Don't blame the Federal Reserve for the country's housing troubles. At least that's what a controversial new study claims. Economic researchers from Harvard's Kennedy School and the Wharton School of the University of Pennsylvania believe they've proved that reduced interest rates and lax regulations were not the primary cause of the housing bubble.

The authors of the study instead point to the currently allowable mortgage interest tax deduction as the main culprit.

But before you get too panicky about losing your mortgage tax deduction or other government benefits for homeowners, let's take a closer look at their conclusions. Also note that Federal Reserve Chairman Ben Bernanke disagrees with them. In fact, he thinks lax regulations sent the housing market into a downward spiral.

So who's right?