web page With home prices continuing to plummet every month, it may be hard to believe. But it's now officially government policy to keep those home values as high as possible. And Neil Barofsky, the Special Inspector General of the Troubled Asset Relief Program, doesn't like it one bit.
In his latest quarterly report to Congress, Barofsky accuses the Obama administration of recklessly reinflating the real estate bubble in an attempt to keep the housing market going and prevent the collapse of financial institutions.
SIGTARP -- not a Bond villain but Barofsky's shorthand title -- sums up all the sundry spending in one handy place. The Federal Reserve has been buying mortgage-backed securities and other mortgage-related debt in enormous volume, projected to reach $1.2 trillion by the time the effort expires at the end of March. Treasury is spending hundreds of billions more to capitalize Fannie Mae and Freddie Mac, so the agencies can continue to finance home mortgages. Congress has extended the $8,000 tax credit for first-time homebuyers and added a $6,500 credit for existing owners buying new homes. And while Treasury's $75 billion Home Affordable Modification Program is designed to forestall foreclosure for homeowners, its direct (and intended) effect is to keep home prices high.
Combine all that spending to boost home prices with a still-bloated financial industry – too big to fail, expecting to get bailed out, and rewarding executives with huge bonuses in exchange for taking big risks – and, warns Barofsky, the U.S. financial system is headed for The Great Crisis, Part II. "Even if TARP saved our financial system from driving off a cliff back in 2008, absent meaningful reform, we are still driving on the same winding mountain road, but this time in a faster car," cautions the report.
It's old news that the feds are reinflating the bubble by propping up prices -- I wrote about it while George W. Bush was still president. But it's still a big deal to have a critic as influential as Barofsky. He is a prosecutor - a former assistant attorney general in New York specializing in mortgage fraud. When he says price inflation is not just a waste of resources but a dangerous development, we'd all do well to listen.
Aren't we just soooo Lucky that we have Obama as the President! It's just what I've thought when I heard he was elected. He's in way over his head!
Unfortunately, his VP is one of the dumbest people on Earth (to prevent his assasination) and will be of no use in helping the President formulate a workable plan.
Congress can't help either, because neither party wants to listen to any ideas, except their own.
The Cabinet members can't help because official policy is to look good, fake the funk and blame others when all else fails.
The only ones who can solve this problem are American Tax Paying Voters. Vote the Bums out!
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