... so, now that the $700 billion bailout package has passed Congress, the money will start flowing to local banks, and be made available to consumers, right? Wrong, the first thing that has to happen is housing prices need to stop falling.Um... no! First off... it is not the job of the government to set prices. It is the job of appropriate government agencies to oversee fairness in business and social exchanges. It is the job of these agencies to ensure reasonably honest dealings, to set reasonable (though not excessive) regulations and disclosure requirements toward that goal, and most importantly to staff these agencies sufficiently to enforce the regulations. These are things that Ronald Reagan started dismantling, and which has accelerated in the ensuing two decades, and which must be reversed.
Housing prices are falling because they have become out of line with their inherent value! No amount of government intervention (short of providing every citizen with a housing allowance!) can change that. Let the values drop until they are in line with that value. To some extent this is where "free market" principles must be respected. Values should and will be set by the public's ability and willingness to pay. Gasoline prices have dropped ~20% over the last month for exactly this same reason.
The task that the government should have been and should be focused on is not stabilizing housing or stock prices, but rather mitigating the negative effects of their fall. They will continue to fall! We should brace ourselves. And we should turn to our elected officials, to step up to the plate and swing. And if they won't, or they foul, or they strike out (as has clearly been the case these past few years), we should expect them to get out the way, and let someone else step up who can handle the job!