As bubbles must inflate(a decoupling between price and value) so they MUST burst.

The more interference with the bursting process(a realignment of prices to values) the more prolonged the process and the more destructive the aggregate consequences.

The Govt abetted by Wall St is prolonging the bursting process from, perhaps, the 18 to 24 months it would have taken on its own to 8 to 10 years. The aggregate wealth(and consequently jobs and income ) loss to the economy ,as a result, of Govt and Wall St perversions and distortions will be several times greater than it would have without this corruption of real estate(both residential and commercial) markets.

The infection to both the economy and civil society from a massive bubble involving a substantial fraction of American households must be purged swiftly and thoroughly for the economy and civil society to regenerate. By allowing the infection to persist for years, WashDc and Wall St(applauded by a complicit and intellectually empty MSM) are enervating both the economy and civil society and may have seriously impaired their regenerative capacity for a generation.

The Fed has done the following:

* Cuts interest rates from 5.25-0.25% (Sept ’07-today)
* The Bear Stearns deal/Fed buys $30 billion in junk mortgages (March ’08)
* Opened various lending windows to investment banks (March ’08)
* Taken over AIG for $85 billion (Sept ’08)
* Implemented the $700 billion Troubled Assets Relief Program (Oct ’08)
* Bought commercial paper (non-bank debt) from non-financials (Oct ’08)
* Offered $540 billion to backstop money market funds (Oct ’08)
* Backstopped up to $280 billion of Citigroup’s liabilities (Oct ’08).
* Given another $40 billion to AIG (Nov ’08)
* Backstopped up $140 billion of Bank of America’s liabilities (Jan ’09)
* Bought $300 billion worth of Treasuries (Mar ’09)
* Bought $1.25 trillion in agency mortgage backed securities (Mar ’09-’10)
* Bought $200 billion in agency debt (Mar ’09-’10)

Honestly, that’s all I can remember offhand. There are undoubtedly more moves (including the ones we don’t know about due to the Fed’s complete lack of transparency).

What’s most interesting is that these 2010-2012 resets are coming after millions more are out of work. They are also on higher priced homes which are very hard to sell as they have the most value to lose going forward. Interest rates are rising causing qualification to be even harder, plus banks are reluctant to lend as prices keep eroding.

Even people paying their mortgage will find their homes underwater.

- someone

Related Posts:

• The $68 billion in TARP repayments is a joke.
• 2008 saw a meltdown of the Wall Street investment banking industry.
• What’s the worst scenario could happen to a person?
• An article in the WSJ appearing hours ago as follows:
• The list of bailouts you want to remember

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