TARP (Troubled Asset Relief Program), AKA the great bail out, has been no more effective than Obama’s famed lending guidelines, which of course will never be practiced.
In a very real sense, the US government, in partnership with US banks, artificially inflated the housing markets. Since the Fed and banks work hand in hand (the Fed now owns most banks, and always did provide cheap capital to banks) and possess all the mortgages in one form or another, they essentially own all the real estate with a mortgage attached- regardless of the property’s arbitrary value.
Whether a property is worth $1000 or $1,000,000, this arbitrary value has never been up to the would-be homeowner.
But it certainly is up to the mortgage holder. After all, it is he- not the hapless homeowner- who will determine the property value. A homeowner might wish and guess what the property is worth, but only the Fed/Banks gets to say what it really is worth, in dollars.
As such, the Fed/Banks can say, at will, a property value is very high on one day, or very low the next. A new coat of paint or a third story addition have no real influence on the value of a property- contrary to what the legions of Fed/Banks-sponsored ‘qualified’ real estate appraisers may indicate. The physical attributes of a property are not criteria for market influence.
The goal of the Fed/Banks is to bend the back of working America to the point just shy of breaking. A broken-back America shuts down- just like it threatened to do as fuel costs rose near $5.
The corporate republic likes to keep close tabs on America’s breaking point- it’s the key to max profits. But it’s a dicey game and not a perfect science.
It is fair to say the TARP funds never left the building. They just crossed the table, much like old friends arguing over who will pay the dinner bill. But as over 200,000 jobs continue to be lost each month, and multi-billion dollar TARP bonuses stay in corporate Washington, America’s back continues to bend.
DC Corporate apparently has much confidence in the flexibility of America’s back. It remains to be seen if the estimates are on target.