"Yesterday's Case-Shiller data showed that house prices in its 20-City index fell 0.7 percent in September. This would be an 8.5 percent annual rate of decline, which would imply the loss of more than $1 trillion in housing wealth over the course of the year." Dean Baker on his blog November 30th 2010.
The above data strengthens the opinion, that I have held from the beginning of the financial crises of 2008, that a sharper faster home price decline would have been better. Home prices seem to be getting back to tend anyway all that the Government action has done is delayed the inevitable and extended the crisis while making it less sharp, restricting the unemployment crises to weakest employees. If there was no TARP more banks would have failed home prices would have dropped like a rock to the point were value buyers and investors (cheap cautious people) and upstarts (young people with no debt) would start buying them up. Unemployment may have reached 20% but I think might have started to recover in 6 months to a year. We have had 10% unemployment for 2 years that means that some workers with the least demanded skills have been out of work for 2 years. I think that it would have been less damaging to have more people out of work for a shorter period of time. With 20% unemployment higher status people will be out of work and there may be more comradery and simpath for the unemployed. Also more create ideas to use these workers might come about.
Of course the fed would have had to buy a lot of stuff to pump money into the economy. If I was the Fed chairman, I would have gone as far as to have the Fed buy stocks to pump money into investors hands! I would also have eliminated the FICA tax to short up the balance sheets of working class and debtors.
One of the benefits of my approach is it would have killed more of the corrupt investment banks and I think that we would be better off without them.