How housing weakness may change the Fed’s game

Since banks would be earning zero, or even less than zero, on their deposits at the Fed, their incentives to lend could change quickly, particularly if the Fed were to adopt a negative deposit-rate policy — something no one is currently expecting. With that dramatic step, the Fed could actually charge a fee for holding those deposits. The Fed has written about such a maneuver in its myriad studies on how to get a deflationary economy moving again.

The Fed, FDIC and Comptroller’s Office, could also begin to relax credit standards so that qualified U.S. buyers can gain access to cheap money from banks.

Mortgage credit remains as tight and unavailable to most buyers today as it was at the depths of the credit crisis in 2009.

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I am not suggesting that regulators relax credit to the extent they did in the years leading up to the real-estate bubble and bust. However, allowing bankers to make traditional 10-percent down mortgage loans to people with decent, but not perfect, credit should get the looky-loos buying again.

I am betting that the Fed has a few more tricks up its sleeve to take a more targeted approach to getting the economy to fire on all cylinders.

If it doesn’t “taper the taper,” I still expect the Fed will continue unconventional efforts to get the economy, and more specifically, real estate, rising again.

The economy needs all tailwinds, and virtually no headwinds, if the Fed expects the economy to return to its fullest potential and allow it, ultimately, to restore policy to normal — whatever normal means in a post-crisis environment.

Commentary by Ron Insana, a CNBC and MSNBC contributor and the author of four books on Wall Street. He also delivers a daily podcast, “Insana Insights,” and a long-form weekly version, both available on iTunes and at Follow him on Twitter

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