From the Cato Institute
House prices were always going to find their “true” bottom. The question was simply: did we want to get there right away, or drag out the process? Washington chose the course of dragging out the process, at considerable cost. I believe dragging out the process has only further spooked potential buyers. Any buyer today has to suspect that further price declines are possible. We need to get to the point where the only direction is up. We aren’t there yet. Policymakers continue to ignore the basics of supply and demand. Unfortunately the rest of us pay the price for their doing so.
We'll all be hearing a lot over the next 17-18 months or so regarding the bold and daring steps the administration took to rescue the economy through gimmickry such as the GM and Chrysler bailouts and home-owners assistance programs and how it was the politically-unpopular thing to do. Nonsense. What's so bold and daring about spending tax-payer money?
As the housing market is proving, sometimes the bold and daring thing to do is to do absolutely nothing. And many times doing absolutley nothing is indeed politically-unpopular but totally necessary.