Monday, September 29, 2008

No more $700 billion for you

Now that the bill failed, I have an idea of what might work. How about, instead of giving the bankers the $700 billion, we just go out to the people holding the bogus mortgages and use those $700 billion to make payments on them? Certainly that would drive up the value, no?

But then bankers benefit, and they should incur losses nonetheless. So here is a slight modification.

  1. We let individual houses go bankrupt, in a BAU manner.
  2. When the houses go through the repossession process, we insert a clause saying a certain fund has priority in buying the property at a fair market value. For example, it goes through auction, and if the sale price does not meet the reserve price, then the fund gets the property and issues a loan for the sale price to the people previously living in the house.
I am sure this needs some adjustment to cope with ill intent, but if we are going to spend $700 billion we do not have, we might as well spend it on ourselves. Eventually, that $700 billion will end up at a deposit window somewhere, so banks cannot really complain one way or the other.


Anonymous said...

There is no way that this bill could have passed the way it is! The bottom line was that one of two companies would have had the power to manage that money, too much power in few hands!


Ilya Bodner
Small Business Owner
Initial Underwriting

Carl Gundel said...

Why don't we just write a bill that forces mortgage lenders to refinance loans to homeowners with terms they can afford? If a 30 year mortgage becomes a 40 year mortgage, or a 10% interest mortgage becomes a 6% mortgage, is that better or worse than what we're seeing now? The banks still get a monthly payment (better than auctioning the property I'm sure) and when (if?) the economy picks back up the homeowners can refinance if appropriate.