Ethical Solution to Mortgage Crisis: De-Bundle Loans and Identify Known Risks

Chris Banescu Blog | Chris Banescu | Sep. 30, 2008

I have just sent this appeal to my representatives in Washington. Feel free to copy and paste and send to your representatives.

Dear Representative,

Please do NOT support the $700 Billion Bailout Plan until the Banks and the Lending institutions indentify the Toxic Loans and DE-BUNDLE them.

It would take very little effort on their part to identify each loan based on a computer search of their existing loans:
1. Full Default = no payments in 3+ months (Toxic)
2. Partial Default = no payments in 1-3 months (Potential Toxic)
3. Good Standing = on-time payments

Then the Government can:

. . . more

Comments

  1. As much as I dislike George Soros’ politics, he raised a valid point that supports my suggestion:

    Soros has emerged as a harsh critic of the Treasury Department, especially of Paulson’s proposal for the government to buy $700 billion of distressed mortgage-backed securities to restore the flow of credit in the financial markets.

    […]

    “The two main principles are to inject more cash into the securities market and shore up home mortgages,” said Moran, who has been briefed on the proposal. “He thinks it has to be more direct than the government buying up tranches. He doesn’t think the government should be buying up toxic stock.”

    […]

    Soros has fiercely criticized Paulson’s proposal.

    “Mr. Paulson’s proposal to purchase distressed mortgage-related securities poses a classic problem of asymmetric information,” Soros wrote in a Financial Times op-ed dated Sept. 24. “The securities are hard to value but the sellers know more about them than the buyer: in any auction process the Treasury would end up in the dregs.”

    Soros would like the government to restore the flow of credit to the financial markets by purchasing equity in companies saddled with distressed assets, said Moran.

    Soros floats alternative bailout plan with Dems
    http://thehill.com/leading-the-news/soros-floats-alternative-bailout-plan-with-dems-2008-09-30.html