not sure if it will work or how difficult it is to implement...
but if subprime is the original trigger (though it is really a manifestation of excesses, bubble, corruption & incompetence of the last 8 years) and subprime poisoned the CDO baskets which originally comprises supposedly healthy assets before the global financial meltdown and credit crunch, then is it possible to focus on auctioning off removing subrpime and toxic assets (NOT the entire bank loan portfolios with mostly "would-have-been" healthy loan assets..
instead of just pumping US$250b orUS$750b into Wall Street (and Main Street), can a government entity be set up to buy ONLY the subprime mortgages INSTEAD of the CDOs tainted with subprimes(and otherwise "would-have-been" healthy bank loans which overnight became non performing as a result). this will take away the multipier effect and maybe reduce by 10x or 20x the taxpayer's $ required for the buyout.
this is NOT a bail out at all but a commercial transaction as if banks were to sell "would-have-been" healthy loans and shares at bashed down prices, then they can sell subprimes at bashed down prices so $0 even so that confidence can return and "would-have-been" healthy loan portfolios will begin to recover to "would-have-been" fair price...
if subprime were bought out at $0 or 10% or even 30% of the price then most will NO LONGER be subprime as the borrowers would now be able to pay their mortgages and the housing price even at a high 30% are already higher than the current illiquid hosuing market...(whereas banks, savings & loans, freddie mac, fannie mae are going for $0 bankruptcy or 10% or their peak price)
this way-
- subprime borrowers can to keep their home and continue to pay their mortgage with dignity and NOT force out of their homes, which is 1 of your main themes...
- taxpayers may even make some $ from buying out subprime at based-down prices...which at 10% of 30% of original house price must be the bluest chip loan asset
- Wall Street get a chance to recover and return value to its shareholders and bondholders with removal of subprime (which hopefully also remove toxic assets...this may not fully be as there are also "subprime" in credit card and other loans...then such individual subprime loans should be auctioned and NOT the baskets....basically any type subprime loans where borrowere default today but unlikley to default if priced at 10% or 30% should be bought out and remove and the remaining loans will hopefully be back to performing again w/o default...
- Obama adminstration provide leadership and regulatory oversight but NOT bureaucracy being forced to manage commercial entities (likely inefficiently and stifle innovation and "change" despite being well-intentioned and not yet corrupt at the beginning...this risk is there...)..the adminstration can continue to provide leadership and regulatory oversight w/o being shareholder of Wall Street
all the best...the world needs a strong healthy leader and innovative non corrupt america
brgds
Live Green
