TARP Watchdog Diagrams Exactly How The Government Is Inflating The Next Housing Bubble

The government has just visualized exactly how it is trying to manipulate the housing market higher in its latest TARP report by the Special Inspector General (SIGTARP).

Mechanisms For Supporting Home Prices

Supporting home prices is an explicit policy goal of the Government. As the White House stated in the announcement of HAMP for example, “President Obama’s pro- grams to prevent foreclosures will help bolster home prices.”…

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…The Federal Reserve can thus boost home prices by either lowering general interest rates or purchasing mortgages and MBS. Both actions, which the Federal Reserve is pursuing, have the effect of lowering interest rates, which increases demand by permitting borrowers to afford a higher home price on a given income.

Full document below. (Via FTAlphaville)

January 2010 Quarterly Report to Congress

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