The federal government invested 700 billion dollars in the housing industry during it’s past fiscal year. Gulp.
That is 700,000,000,000 dollars folks. Into our industry. By any measure we are not any better than we were last year. Of course, it can and probably should be said without the governments intervention we could be in a much worse place.
But this is the cost of not letting the market fall to it’s natural bottom but instead of trying to manage it down.
700,000,000,000 dollars.
And the irony is the TARP Special Inspector General, Neil Barofsky, is not happy on how the effort is going. In the politically circumspective world of Washington D.C. he has issued a scathing report on the governments handling of the housing market.
The Special Inspector General for the Troubled Asset Relief Program said the increase was due largely to the government’s pledges to supply capital to Fannie Mae (FNMA.OB) and Freddie Mac (FMCC.OB) and to guarantee more mortgages to the support the housing market.
Increased guarantees for loans backed by the Federal Housing Administration, the Government National Mortgage Association and the Veterans administration increased the government’s commitments by $512.4 billion alone in the year to June 30, according to the report.
“Indeed, the current outstanding balance of overall Federal support for the nation’s financial system…has actually increased more than 23% over the past year, from approximately $3.0 trillion to $3.7 trillion — the equivalent of a fully deployed TARP program — largely without congressional action, even as the banking crisis has, by most measures, abated from its most acute phases,” the TARP inspector general, Neil Barofsky, wrote in the report. via Reuters
As I have said so many times before, instead of creating a gentle landing for the housing and banking markets, we should have let the carnage happen. Sure there would be pain, but it is the pain of a band-aid being ripped off quickly. It stings like a bastard but it is done.
Right now we are removing the band-aid slowly. Very slowly. And instead of a sharp pain, we have a lingering pain intermixed with moments of respite. But as anyone who knows about removing band-aids, the quick pain is much less painful in the long run than the slow removal.
The problem is that the collusion between the politicians and big business is the driver here. Everyone is so worried about protecting the vested interests instead of doing what is best for the country. Ah, but that is for another post.
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The real jewel of this article is the last paragraph! So true and it is time people realize it!
The only way the band aid would have been ripped off, in my opinion, was if it would put even more money in the pockets of the people responsible for that boo-boo in the first place!
If you don’t mind, I’d like to take some of this over to my blog. And call this the band-aid effect. I think students need to see this and understand what the man they voted into office is doing to their future.