Duncan Black nails it:
Overthinking
People are spending too much time trying to make sense of a plan which doesn’t make much sense, certainly not as advertised.
1) Funnel more government money to the banksters.
2) Allow the banksters to pretend for a bit longer that their hunks of big shitpile aren’t quite as shitty as we thought by using the bullshit price that this process comes up with, allowing too big to fail businesses to stay in business for a bit longer.This might make sense if you truly believe the magic market you believe in fervently is genuinely incorrectly pricing the assets, perhaps because you genuinely believe that if you could turn around the economy fast enough that you could massively reduce expected foreclosures.
But if you genuinely believe that, I don’t think you’ve been paying too much attention to just what’s been going on in the housing market. I don’t think you paid too much attention 3 years ago when you didn’t realize that it didn’t quite make sense that so many people could afford $700,000+ homes in Orange County. I don’t think you paid too much attention to the degree of speculation and outright fraud that was happening in parts of the country.
Emphasis added.
I remember talking to Al Mascitti about this on the air prior to the election. There are NO ASSETS troubled or otherwise. He said, “Well there are still houses, but they are not worth much.”
No. There are some worthless houses around – but we are talking about loans taken out to build vast delevelopments to be built on man made islands. Think 1,000’s of little Dubias all over the place.
Even the worthless houses cluttereing up the place don’t have value because thier mortgages we spit into funds 40 times over. You can slice a pizza into eight slices and those slices still have value. You can’t slice it into 1,000 slices and try to reassemble the pizza. It is nothing but worthless mush. That’s what those mortgages are now. Mush.