Comments | armchairgamer: Financial crisis: The simple solution?

armchairgamer

Financial crisis: The simple solution?

Sep 22, 2008 10:06

Waitaminute, hold the phone.
( Would this work? )

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Comments 5

ouraboros September 22 2008, 17:53:08 UTC

First, a brief layman's explanation of what happened ( ... )

obviously some strange usage of the word 'safe' ouraboros September 22 2008, 18:02:56 UTC

By the by, before you suggest that all those leveraged bets be simply declared null and void, realize that a lot of pension funds and money market funds *bought* those bets, because they were supposed to be collateralized, i.e. safe -- and paid good money for them. Want all those retirement accounts to plunge further, just as the Boomers are set to retire in one giant demographic wave?

Sigh. armchairgamer September 22 2008, 20:39:34 UTC

Thanks for the link, that does clarify some points, though my basic understanding remains the same. Jim Manzi takes a long time in saying it, but he basically agrees that at some point the bailout has to nationalize the housing sector. I just think that's where we should start. Not all houses are in foreclosure or close to it, but if the majority could magically start paying for the house they are in, they can stop trying to sell it. House prices bottom out. The feds give $ X thousand to the nominal mortgage holder to own the loan, (so they can set payments that can actually be met). The $X thousand gets mixed in with YZQ payments on similar homes, as well as ABC payments the majority of mortgages are still paying, and all that money trickles through however many owners there are. Yes, these securities aren't worth what was promised - but there's no way we should pony up the 20% interest (or whatever) the loan was written for. Yep, funds that are heavily into the bad loans will still be screwed. Most of them should be OK. ( ... )

Re: Sigh. ouraboros September 23 2008, 20:10:07 UTC

I see what you are getting at, that you are trying to fix all the leveraging issues by fixing the original cause for all that leveraging. The problem is leverage has a lot of momentum. If all the bets didn't get called in at once, the dance can continue, but once one domino starts falling it's very hard to stop, and that's what needs to happen before you can pick up the ones that have already fallen. I think your idea is sound in and of itself, I just think that that actual $s lost on foreclosure is a tiny fraction of the $s lost on all the leveraged bets, and it's like trying to shore up a levee when the tsunami is already on its way ( ... )

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