Bailout Watchdog Explains Unaffordable Housing Policy

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.

In another section, Barofsky notes, "Supporting home prices is an explicit policy goal of the Government," and demonstrates this with a flowchart in which all options converge on one point:

If you're looking to take the Talking Heads' advice and not worry about the government, an item like this "Home Prices" arrow that is always green and always pointed up is a good place to start. How dangerous can people be if they believe (boldly ignoring the "evidence" out in "non-virtual America") that public policy alone can keep home prices erect?