There is nothing wrong with this program as currently intended. The lenders having been trying to work out loans on an individual basis. The problem has been the task is far too massive to accomplish this way and the loans are bundled in a way to make work outs impossible. The treasury is establishing a system to work out the loans that have a chance to be saved en masse. The only negative is that the formula worked out will not be perfect and some will get a work out when they should not (and vice versa). This is a very acceptable flaw. The thing to be worried about is whether this morphes into a bail out of the banks as well. Of course the Fed is doing it's best to handle that anyway...
There is nothing wrong with this program as currently intended. The lenders having been trying to work out loans on an individual basis. The problem has been the task is far too massive to accomplish this way and the loans are bundled in a way to make work outs impossible. The treasury is establishing a system to work out the loans that have a chance to be saved en masse. The only negative is that the formula worked out will not be perfect and some will get a work out when they should not (and vice versa). This is a very acceptable flaw. The thing to be worried about is whether this morphes into a bail out of the banks as well. Of course the Fed is doing it's best to handle that anyway...
Posted by: The Prince at December 1, 2007 3:51 PM in response to Subprime Bailout In The Works