Illusional Delusion

China's Statements About U.S. Debt Are Overblown

I doubt that. The financials need capital even if they are really healthy to weather the storm and hosing the creditors is the last thing you need. It would be good though, since taxpayers are paying for the financials' bad bets with or without the bailout, so why should we kid ourselves and think that they are solvent. Stemming the rot is important, but it should not be by sucking value out of our everyday dollars though.

On Jun 01 12:49 PM pslater wrote:

> As for Fannie and Freddie debt, I wouldn't rule out BHO doing

Three Problems with the Fannie / Freddie Mortgage Modifications

I would sympathise with homeowners facing foreclosure, but eventually, no one escapes blame for this mess. The banks should take the blame it deserves for any predatory "selling" of its loans while borrowers should share the blame taking something they could not afford. Ultimately, both sides are guilty of something that many taxpayers have not committed and unwilling to bear.

I actually think that BofA, JPM and Citi are trying to make good moves to rewrite some of the loans, but I would agree with Paul that it is hard or impossible to accomplish. I definitely think FMN and FRE would invite doom by doing that. Without the proper valuation and transparency, any action would still have a huge risk to fail. Not to mention if you revalue one mortgage, you technically need to revalue all the mortgages.

However, since the true pricing of the real estate is the problem of the loans, why should the banks focus only on salvaging the bad loans? Why not just try to revalue the value? It does take some time, but like Richard said, there will be others? Perhaps the banks should then take a writedown of part of the loan as losses should owners choose to move on and downgrade their homes? I must admit, two problems exist for this, time and guts to swallow the bitter pill. I personally will swallow bitter medicine to get well soon, so I hope this idea could fly into something better. It is better than obliteration though.