If I weren't already incensed as to the "good judgement" McCain's showing by nominating Palin (is he tring to force me to vote for Obama?!), this would certainly do it. The whole "it's a crisis, let's elect a king" reflex is never good, but the "we have to act yesterday" drums keep beating....
For half that amount we could simply buy all the foreclosed houses outright and transfer them to HUD (not that I think the Feds have any business having a HUD, but it's better than making Paulson the most powerful man in the world).
6 comments:
Privatized profit, socialized losses... business as usual for both parties.
Sadly, this's different. Something *does* have to be done, but this isn't it. Two options:
1) refinance everyone who wants at 30/5 through HUD then sell those to the market.
2) open up the discount window to other lending institutions in exchange for preferred shares against the companies in question.
Remember my harping months ago about what credit deflation looks like? This's it.
Buying the underlying assets from investors without also taking a pound of flesh will let lenders get back to exactly the sort of business that got us here in the first place. And does nothing to prevent another round of foreclosure-driven credit-implosion if housing prices fall further (as I assume they will).
Let's hope we don't get to monetary deflation, or we're all in grave trouble.
Maybe part of the problem is the constant reselling of the mortgages to begin with. I like the idea of HUD taking over the foreclosures and seeing what it can recoup, but I'm not sure having HUD refinance all these things and then putting them up for sale is a solution.
It seems to me (perhaps naively) that a great many mortgages are still good and they will be paid off, with profit to the owner, in good time. They're just stupidly mixed up with other crap. It seems to be that SOMEONE must sit down and untangle these mixed mortgage securities (5th level Arcanum - I love that) - the good from the bad - and then see what's left. The value of the good mortgages will likely outweigh the value of the bad, and so confidence could be restored this way. To me much of the mess is that no only were people greedy, but they are too damn lazy to clean up their mess as well.
I don't think it''s different this time b/c something has to be done... something *always* has to be done. Maybe that's not what you're saying though.
Oh - I forgot to say - what if the "pound of flesh" would be in the form of more government regulation?
Not good enough; that punishes all folks equally. This should punish the particular users.
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