Scrooge

How to Spend $700B and Actually Solve the Problem

Most of this worthless debt is 'NINJA' loans to borrowers with No Income, No Job, no Assets. The loans came about because Congress mandated that banks MUST make them: to atone for decades of supposed 'redlining', not making loans to people in certain urban areas. In the past banks would not loan to people who did not meet the credit requirements thought 'safe'. Those people were generally poor, and many lived in high-crime, low-value-housing areas: read 'The Ghetto'. So social engineering changes to banking regulations erased the necessity to have some form of collateral to assure a bank of payback on a loan. 'The Government' assured the banks that their risk was covered, and the loans got written. Real estate boomed, and values went up and up. Soon defaults on mortgages began to rise, and at a certain point, the value of all those bundled high-risk portfolios came into question. A house that in the boom time looked worth $500,000 was suddenly looking more like $300,000 based on sales of comparables in the neighborhood. Many a mortgage exceeded the current value of the property, so why pay it off? You would spend more on the payments than the property could give you back; and the riskiest bets went down first. Fannie Mae and Freddie Mac led the charge, and now lead the retreat, along with Wall Street debt-portfolio slicers/dicers who hid the risk by making salami of bundled toxic morgages and assigning fictitious value ratings to it. So by all means, lets completely dismantle our entire national credit structure, and precipitate a global recession, to punish those greedy schmucks! It's great election year politics! But get Congress' social engineers first, starting with Pelosi, Obama, and Dodd, who torpedoed the Fannie Mae, Freddie Mac fix legislation in 2005, while receiving mucho contributions from those greedy Main Street and Wall Street bankers.