Read How To Bail Out Ordinary Mortgage Holders And Not Just Banks at Firedoglake for an equitable solution to the financial markets mess. The proposal has all kinds of upside,
a) a floor is set for mortgage prices. (Whatever discount the government is buying at. Probably 60% to 70%, but it should be based on what the long run price was in the area before the housing bubble.) This ends the confidence crisis in these securities, because there is now a market priceâ€”what the Trust will pay.
b) It helps homeowners stay in their homes.
c) It gets rid of overly complex mortgages and puts in their place a dead simple mortgage that anyone can understand.
d) It punishes lenders, which they deserve, for making loans they should never have made.
e) While it does keep homeowners in their homes, it doesn’t let them off scot-free either. In exchange for a good mortgage they can service, they give up some of the future profits on sales in their houses.
f) The government will almost certainly make a long term profit on this. This is important, because it’s not fair for people who aren’t underwater on mortgages to spend hundreds of billions or trillions bailing out those who are without some expectation that in the end it won’t be more than just a transfer of wealth to them and to investors and banks.
The downside for me is that my lender carries my mortgage in his portfolio. It was never bundled and sold to the dickwads of Fannie Mae or Freddie Mac. So what’s in it for me?
Wait! I know! (ooo Horschach moment… call on me Mr. Kotter) What’s in it for me is a stabilized financial market, a restoration of trust in the government and confidence in the future, a community with fewer homeless people and more people with a stake in that future.
The Democrats will have to grow a pair of brass ones to package a proposal like this and get it passed over the objections of Cheney and Bush. Never happen.
(Thanks anyway to Jon H. for pointing me to the article).