blackcabbage.com

The 2008 US passing of the TARP plan was initially set up to have the government buy back bad mortgage related assets from the financial industry.  They would hold the bad securities until the housing market rebounded and then be in the position to break even or possibly make a profit for US tax payers.  Well, that is not exactly how the plan was ultimately implemented.  Instead of buying these bad debts, the government invested in the preferred stock of these banks to provide a quick capital infusion for the banking system.

Buying the bad debts would have caused a nice reduction in refinance mortgage rates, while stimulating mortgage lenders to be more aggressive and lend more money to those seeking new home purchases and refinance home loans. Instead, the banks are hoarding their cash and maintaining or increasing the barrier to those seeking home financing.