Housing prices decline over 5% nationwide

So much for housing recovery.  According to news wire housing prices have dropped over 5% during the past 3 months.  According to HW some areas seem to be heading for a double dip even though they are still off the lows of summer 2009.
It is going to be an extremely long wait if the treasury continues with its plan to prop up the banks until their assets are valued high enough for solvency.  Housing prices have drop significantly in all areas.  We  have allowed the banks to hold mortgages on their books by changing the accounting rules, since they didn't clear their books with tarp funds. 
The big selling point for the TARP was that it would be used to clear the bad loans or underwater loans off the books so the banks could start lending again.  The congress gave little thought to the reality of housing prices when it comes to lending.  The banks will not lend on depreciating real estate like the will on automobiles.  The may do it if you want to pay it off in 5 years but they will not do it with a 30 year loan. 
Allowing the banks to use the TARP for captial reserves was a mistake.  It saved the banks but prolonged the recession.  It was a major failure of government when they did not think through the possible outcomes of propping up the banks.  Or thinking about the outcomes and then pressing foreward anyway. 

Housing prices are at the heart of the matter.  Appreciating real estate values generates trillions of dollars for the economy.  Allowing the banks to manipulate their accounting without having tomark their paper to market was a major mistake that will be a core issue holding back recovery.  Mark to Model would look good on everyone's balance sheet right about now. 

The "covert plan" by the government was to buy time for thanks while allowing housing prices to bounce back.  In effect, with help from the fed, this would have improved the balance sheet of the banks.  However, the TARP was not nearly enough to keep the banks solvent without the accounting changes.  The banks and the treasury never wanted to address what would happen if housing prices continued to decline. 

We have not seen a solution yet but something needs to be done or housing prices may go down further. http://financialrealityrevisited.blogspot.com/2010/11/feldstein-solution-for-underwater.html