Bailout Watchdog Explains Unaffordable Housing Policy

[tsetsefly]

This is from the reason blog but it has some good info and some sites I didnt know about:
http://reason.com/blog/2010/02/03/bailout-watchdog-explains-unaf

It's almost worth the $700 billion subscription price to get regular broadsides from the Troubled Asset Relief Program's special inspector general (SIGTARP). The recently declassified Sigtarp quarterly report [pdf] is scathing-enough-for-government-work in its description of the TARP's enormous moral hazard problems. For more detail on this, the blogs Seeking Alpha and Calculated Risk are highly recommended.
Much of the report's criticism focuses on matters that are not within the control of TARP to any substantial degree: the rate of home foreclosures, the larger universe of bad loans, slow job creation, etc. But I reiterate my earlier praise for Sigtarp Neil M. Barofsky's writing style. If you want succinct descriptions of what a territorial predator TARP will continue to be until it is eradicated, you can't do better than the Treasury Department's own man:

The substantial costs of TARP — in money, moral hazard effects on the market, and Government credibility — will have been for naught if we do nothing to correct the fundamental problems in our financial system and end up in a similar or even greater crisis in two, or five, or ten years’ time. It is hard to see how any of the fundamental problems in the system have been addressed to date.

THis is taken from: http://seekingalpha.com/article/1858...n-moral-hazard

• To the extent that huge, interconnected, “too big to fail” institutions contributed to the crisis, those institutions are now even larger, in part because of the substantial subsidies provided by TARP and other bailout programs.
• To the extent that institutions were previously incentivized to take reckless risks through a “heads, I win; tails, the Government will bail me out” mentality, the market is more convinced than ever that the Government will step in as necessary to save systemically significant institutions. This perception was reinforced when TARP was extended until October 3, 2010, thus permitting Treasury to maintain a war chest of potential rescue funding at the same time that banks that have shown questionable ability to return to profitability (and in some cases are posting multi-billion-dollar losses) are exiting TARP programs.
• To the extent that large institutions’ risky behavior resulted from the desire to justify ever-greater bonuses — and indeed, the race appears to be on for TARP recipients to exit the program in order to avoid its pay restrictions — the current bonus season demonstrates that although there have been some improvements in the form that bonus compensation takes for some executives, there has been little fundamental change in the excessive compensation culture on Wall Street.
• To the extent that the crisis was fueled by a “bubble” in the housing market, the Federal Government’s concerted efforts to support home prices — as discussed more fully in Section 3 of this report — risk re-inflating that bubble in light of the Government’s effective takeover of the housing market through purchases and guarantees, either direct or implicit, of nearly all of the residential mortgage market.