Wealth & Money Quote by Franklin Raines

Technocratic on the surface, this line is really a political defense dressed up as market mechanics. Raines draws a clean distinction between what policymakers can do (flood liquidity) and what they supposedly cannot control (inflation expectations that “the average investor” prices in). That move matters: it shifts responsibility for higher mortgage rates away from any single institution and into the diffuse, almost weather-like realm of sentiment. No villain, no lever, just “belief.”

The phrasing is doing quiet work. “Flooded” signals force and urgency, but it’s paired with a calming implication that liquidity doesn’t directly touch the household pain point everyone cares about: the mortgage rate. By relocating causality to expectations, Raines implies rates aren’t a moral or managerial failure; they’re the rational output of a collective forecast. It’s a worldview where markets are jury and judge, and ordinary borrowers are stuck living under the verdict.

The context is late-20th/early-2000s American housing finance, when mortgage costs became a proxy for the public’s sense of economic stability. Inflation expectations are real, but invoking them can also be a strategic fog machine: it narrows the conversation to bond-market psychology instead of structural questions about credit policy, housing supply, lending standards, and the incentives of big finance.

Raines’ intent reads as credibility management. He’s asking the audience to see rising mortgage rates not as a policy blunder or an industry problem, but as a reaction to a feared future. The subtext: if you want cheaper mortgages, don’t blame the system - reassure the market.