Holman Jenkins in today's Opinion Journal [link here, thanks to Richard Reinsch for the pointer]:

Any debate about a housing bailout can be put aside -- the bailout is underway... No, the perverse effect won't be a replay of the '30s, or even Japan's decade of stagnation in the '90s, but the latter is your model, with a little inflation thrown in. The goal: avoid foreclosures and slow the fall of home prices to market-clearing levels.

As for the "little inflation thrown in," SJSU's Barstool Economists have this:

Warren Gibson queries:

According to the BLS wizards at http://www.bls.gov/news.release/cpi.nr0.htm the housing component has been rising at a annual rate of about 3%, though not quite that fast in the last couple months. Can anyone tell me why, with house prices declining, the housing component of CPI continues to rise? What am I missing here? I know they assume homeowners are renting to themselves, and maybe BLS isn't "marking to market" existing houses.

Jeff Hummell replies:

Not since 1982 has the CPI included house prices, nor is there any logical reason that it should. It is after all, a "consumer" price index, and the purchase of a house is primarily an investment. About 40 percent of the CPI comes from housing costs, which includes actual and imputed rents (30 percent), fuel and other utilities (5 percent), and household furnishings and operations (5 percent). Do you know any tenant who has seen a decrease in rents over the last year? I certainly don't. Rents are imputed for owner-occupied housing from the actual market rents of similar propertis, so you are right, they are not marked to the market value of the house, in either the CPI or the National Income and Product Accounts. Imputed rents should only noticeably fall with a decline in house prices if they noticeably rose (faster than other goods and services) with an increase in house prices.

Back to Jenkins and the policy question:

Making the hole even harder to climb out of in tough-love fashion, government policy itself played a big role in creating the bubble, on the bipartisan theory that homeownership begets "social stability."

[...]

So much for subsidizing our way to greater "social stability" by luring marginal borrowers into debt to own a home. The truth today is that politicians are rushing to prop up house prices not to rescue the poor from the ignominy of renting, but to get past the next election without affluent voters having to confront a realistic decline in the market value of their main assets.

So that clears things up, huh?