osewalrus (osewalrus) wrote,
osewalrus
osewalrus

A Last Quick Swipe at the Subprime Meltdown

So, Osewalrus, what's your 30 second before shabbos fix?

Here's what I would do: set up a government corporation that would offer to buy all loans secured by a primary residence for 25 cents on the dollar. (That's a rough guess, it might go lower, might go a bit higher.)
This corporation would then negotiate with the debt holders to refinance on a schedule that repays the loan and is suitable to the economic circumstances of the debtor. The government corporation would be prohibitted from making a profit, although it would be allowed to break even.

Why? Because we usually fix this problem in the stupid way of saving the guys who made the bad loans -- typicaly by throwing lots of money at them. This is stupid on a large number of levels which I will explain if asked. We want the idiots who made the bad loans, who aggressively advertised for these loans, etc. to suffer. How else -- in the absence of federal regulation -- will they modify their behavior if they are not permitted to feel the economic pain?

OTOH, we want to protect the real people, the citizens who took these loans. As an economic policy matter, we NEED to protect these people. As a social equity matter, they deserve protection.

So rather than throw money at the greedy villains who played people for suckers, lets throw money at the poor suckers. The issue in most cases isn't paying back the loan, but managing a system of payments for them to do it. Offering the bankrupt corpses of subprime lenders or the corporations that cannot hope to recoup even 25 cents on the dollar a way to cut their loses should get the loans into the government's hands without lots of annoying litigation.

Problem solved. Off for shabbos.
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