Monthly Archives: December 2010

12/21/2010 Giving up on the Fed – A short historical recap of efforts to persuade the Fed on adopting the SwapRent project

On the eve of 2011, many of the followers of SwapRent and FARJHO on a world-wide basis has mostly already recognized the economic merits of the new equity sharing based home ownership structure of FARJHO and the new alternative cash flow sharing based housing finance system of SwapRent and its many embedded new mortgage structures. The only missing obstacle to a wide-spread adoption seems to remain to be very personal and political.

While many people are fed up with the Fed these days ( please read the site published by Citizens for Better Government ), having deeper and deeper doubt myself about their capability to handle our country’s economy, I have finally decided to also give up on the Fed.

On the other hand, people with important political positions should have the responsibility of political accountability and respect political transparency. If some of them do not live up to what their job’s descriptions are and the American people is doing nothing about it, then economic historians should at least have knowledge of what these public servants could have done and should have done but did not do.

This blog post which was previously preserved as future memoir materials will therefore serve to provide some info for the sons and daughters or grand children of these politicians and presumably economic pundits who make decisions for our country’s economic future, to judge what had really transpired in the economic policy making process by the US administration in the beginning of the 21st century.

My contact history with the Fed started back in July 2007. I have been sharing the SwapRent proposal with the board chairman, all other board members and regional presidents as well as Treasury and many relevant Administration officials since then. There had been numerous email exchanges and personal meetings with key decision makers of the Fed, the Treasury Department and various housing and banking related agencies within the past couple of years since then. The following are excerpts of some relevant correspondences.

At 11:28 AM 11/5/2009, David E. Buchholz wrote:
Dear Mr. Liu,

This message is in response to your email of October 18 to Chairman Bernanke, Board Members, and others. I have been asked to respond to your correspondence.

First, let me thank you again for sharing your ideas regarding innovative approaches to the residential housing market. These are truly challenging times and we welcome ideas on how to address the current situation.

As you may recall, after we spoke last year I attended your presentation at the Milken Institute Lab. As I said in my message following the event, your materials and presentation gave us sufficient information to feel that we understood your proposal and did not require additional meetings at that time. I’m sorry that the response apparently struck you as insincere. That was certainly not my intent and, in fact, we devoted a fair amount of time to studying your proposal. There are many proposals and ideas coming our way, as you might imagine, and we do our best to give them all due consideration. We do not feel, however, that at this time we need additional information about the plan your company is putting forward. Should that change in the future, we will certainly contact you.

Again, thank you for taking the time to share your ideas with us.

Sincerely and best regards,

David Buchholz
Manager, Policy Analysis
Federal Reserve Board
Consumer and Community Affairs
Washington DC 20551
Ralph Liu 11/05/2009 02:49 PM
To: David E. Buchholz, cc:
Subject: Re: Replying to your message

Thank you for the clarification David. Please be assured of my sincerity in working with you guys, for the benefits of our country’s on-going economic prosperity. Thanks again.
At 03:28 PM 11/5/2009, David E. Buchholz wrote:

Thanks, Ralph. We appreciate it and will definitely keep your offer in mind.


After learning about the economic value of using shared appreciation concept to solve the mortgage default crisis back in 2007. The following was what he came up with in 2008. “HOPE for Homeowners – Examples of How Equity and Appreciation Are Shared, written in 10/01/2008 by David Buchholz (page 10 and 11)” This very basic, primitive method of applying the shared equity or shared appreciation economic concepts by him obviously wasn’t quite well received at all. It should not have been a surprise since the various British local governments and academics had already been trying to make these concepts work through similar primitive methods for over 30 years by now, of no avail.

There are plenty of lessons to be learned in that drastic innovations in new business methods to apply these old concepts are necessary to make these simple shared equity or shared appreciation concepts work. Simply copying those failed methods again without spending appropriate efforts in new research and development to create new innovative methods or adopting the research results of other people’s efforts such as the SwapRent proposal would not be able to produce any positive results. In frustration, they lead people back to beating the dead horse on more conventional debt based financing methods. To quote a popular quote widely used in the political circles these days, “Insanity is doing the same thing over and over again hoping the outcome would be different.” People do need to step back and think outside the box sometimes in order to find a workable solution.

What is worst is that David Buchholz’s casual efforts using the most primitive methodologies in introducing the shared appreciation concepts in home financing to the American consumers have all but killed the public’s, the academic’s and politicians’ confidence in the crucial economic value of shared equity/shared appreciation methods as a category to solve our country’s economic problems in time. So much precious time has been lost due to these economic policy blunders. Would it be wise for the tax payers to continue to pay money to let these incompetent government folks continue to occupy those important roles in our nation’s economic policy making? I am truly amazed at our country leadership’s tolerance of incompetency, or should it rather be at the leadership’s inability to tell an incompetency.

Since my change of mind due to the loss of confidence in their intellectual capability in handling these economic issues, I have lost many other opportunities in working with other research individuals at the Fed as well. Here is one example. Upon the suggestion of one city housing professional back in July this year, I have submitted my published article on the SwapRent solutions in the quarterly Journal of Housing Finance International (December 2009) of the International Union of Housing Finance back in August this year to a relevant conference next year hosted by the SF Fed. After reviewing many of my blog postings speaking out against the Fed’s QE and various misdirected interest rate policies, Caroline Reid at the San Francisco Fed who works for David Buchholz finally pulled the plug on the chance for many housing finance professionals throughout the country to learn about SwapRent and FARJHO. Oh well, I wasn’t really expecting she would accept my paper after reading my blogs anyway.

At 05:29 PM 8/31/2010, Carolina Reid wrote:
Thank you very much for your submission to the 2011 Federal Reserve Community Affairs Research Conference. The review committee will begin reading submissions at the end of September, and we hope to be able to notify authors of their decisions before Thanksgiving. I will also let you know if the review committee has any questions about your research.

Best wishes,

Carolina Reid, Ph.D.
Manager, Research Group, Community Development
Federal Reserve Bank of San Francisco
101 Market Street, MS 215
San Francisco, CA 94105
At 09:14 AM 11/19/2010, Carolina Reid wrote:
Thanks again for your submission to the 2011 Federal Reserve Community Affairs Research Conference. Although we had hoped to be able to finalize the selections before Thanksgiving, it looks like it will take us a couple more weeks than planned to sort through all the submissions and reviews. Thanks for your patience! We will notify you of the review committee’s selections as soon as possible.

Happy Thanksgiving,
At 09:49 AM 12/20/2010, Carolina Reid wrote:
Thank you very much for offering to present a paper at the “The Changing Landscape of Community Development” research conference sponsored by the Community Affairs offices of the Federal Reserve System. We apologize for the delay in getting back to you. Unfortunately, we did not select your submission for the program. We received nearly 100 submissions, making it very difficult to select among all the high quality ideas and research topics. The typical reasons for not including submissions were because other papers meshed more closely with our needs, we felt we could not combine certain papers into a cohesive session, and/or papers were sometimes too preliminary.

Nevertheless, we greatly appreciate your interest in the conference, and hope that you will keep us updated on your research projects and papers going forward. If you are interested in attending the conference, please visit the conference website,
for more information. The complete agenda will be up on the conference website starting on January 10, 2011.

Please let me know if you have any additional questions. Many happy wishes for the New Year,


Understandably, it seems to be another political decision, rather than one on academic merits. It is the same familiar issue or concern on “political tractions” that many not-for-profit foundations, banks, VCs and industry groups had openly expressed within the past few years about the SwapRent proposal. It was indeed difficult to compromise by pulling my true feelings and critical opinions in my earlier blog posts about the series of Fed’s unwise actions and policy blunders so that I could get selected by them to introduce my SwapRent paper and FARJHO in their conference under their terms.

To see what damages of these misconceived economic policies of the Fed have already created, one does not have to look further than what the increasing polarization of the American economy with the rich getting richer feasting on a near zero interest rate borrowing cost and the poor getting more and more desperate with a near zero access to credit or equity funding in America as well as the growing global unrest, famine and social instability in poor countries introduced by the hyper inflationary price levels of food and commodities introduced by the Fed’s dollar flooding policies so far. The worst is yet to come while most people seem to still haven’t waken up from their infatuation of the Fed cult.

Three years ago I jokingly predicted in my blog posts about the omen of 12/21/2012 that would coincide with the end of Obama Administration’s legacy, it seems a scaring thought to think that it might indeed become a reality.

With many displaced American once homeowners continue to suffer and our country’s economy continues to deteriorate, let’s see how much longer the Fed as an institution will get to keep on squatting on the important positions without producing any new real conducive economic policy alternatives while keeping whipsawing our economy with feasts and famines using their simple interest rate up-and-down decisions and the enigmatic but much more disturbingly troublesome quantitative easing methods.

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