The latest econtalk podcast. The housing bubble and the subprime crisis are the theme. Around minute 40, Roberts asks if this really is a crisis. Shiller starts to answer, and he sort of explains why he thinks the Bear Stearns bailout prevented something bad from happening, but the topic gets dropped much sooner than it would have been today (it was recorded a couple weeks ago, even before the Freddie-Fannie conservatorship). It's almost as if they say, "We need to run the experiment where the Fed doesn't do a bailout." If so, then they should be pleased--the experiment is about to begin.
If you stay tuned, several minutes later Shiller says that he thinks that securitized subprime lending was a good thing. And he sees financial innovation as a potential solution to problems.
So Shiller, the Yale-based, Keynesian liberal, is perhaps more market-optimistic than I am. I think that low down-payment mortgage loans are dangerous. While I think that financial innovations improve the economy, I don't see any way to protect against Black Swans or cyclical movements in risk premiums.