I am loving the Washington Post's coverage of this crisis so far.
I think other people have proposed this solution too: The underlying problem with the banking system is all these bad securities based on mortgages that people can't pay off. So...instead of giving all this money to the bankers, why not have the federal government pay off the bad mortgages?
In the 1930s, the Home Owners Loan Corp. reissued mortgages to one-quarter of American homeowners.
A new HOLC could pay off these distressed mortgages and give people 30-year, fixed-rate, low-interest loans instead. So it's not like they're walking away from their obligations.
"Like the administration's proposal, this plan would result in the government owning assets. But these assets would be real estate, not complex derivatives whose true value would take weeks to discern. Homeowners would become partners with the government in resolving the crisis."
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3 comments:
isn't that what Fannie and Freddie were doing? see how it worked out for them... basically you'd either have to heavily subsidize the the interest on these mortgages, or offer the same loan shark like rates... much of the problem is people occupying homes their income can't support, which makes them a default risk... also, the issue is that you can't a-priori identify the homes that will default and therefore would have to subsidize everyone... buying wallstreet's toxic paper would be much cheaper in the long run...
gotta love socialism.
heads I win tails you lose.
t paine wrote:
"gotta love socialism.
heads I win tails you lose."
This is the fault of socialism? I think we're in this mess because if laissez faire capitalism. The problem we are in is the exact opposite of socialism. The solution (or proposed solution) is actually socialism.
So in this case one could say capitalism failed and socialism is riding to the rescue in the form of publicly funded bailouts. However, I think the problem is too big for an already deeply in debt government to solve.
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