okay. the bailout appears to be both a scam and a bust. Are bad mortgages one of the root problems?

[leftofthedial]

And if so, isn't the problem that they exist, not who owns them?

I mean, I'm no fan of Paulson or of the scam, er, bailout, but I think it is 100% correct not to buy the bad debt from the unscrupulous and gullible and incompetent lenders. The only solution is to make the bad mortgages good.

I know the capitalist fools in charge (and soon to be in charge) will continue the supply-side madness, but in a more perfect world, wouldn't the best solution be to nationalize (in effect if not actually) the banks, reset the loan terms, stop the foreclosure hemorrhaging and try to make the loans productive?

In my opinion, the problems are far worse than just mortgages, but...

[Hydra]

1. That idea has been proposed by sane economists

But those of us "tinfoilers" seem to be proven correct- there is no move to do anything about the mortgages in favor of putting money in people's pockets.

Only two good things seemed to have happened so far:

1. Pressure mounting on Banks to lend
2. Some lenders are extending mortgages for those who qualify

Both of these things required no tax dollars, and the banks are making money if they do both of these things. Still not explained how handing $700 Billion to Bushco with no rules was a good idea.

[dixiegrrrrl]

10. A thought for the "tinfoilers"

ie: those suffering from Aluminophilia, a term coined by Jackpine Radical.

I like this Michael Lewis quote:

"It’s not easy to stand apart from mass hysteria—to believe that most of what’s in the financial news is wrong or distorted, to believe that most important financial people are either lying or deluded—without actually being insane."

Lewis'article identifying the root of the problem is quite worth the read, and the repeated link to it from a post on the 11th.
Unfortunately, it is not good news.

http://tinyurl.com/5s5w2b

[Warpy]

2. The problems were supply side economics combined with

deregulation. Supply side economics fattened the supply side while starving the demand side. Deregulation allowed thieves to set up shop and take advantage of the starving with predatory lending practices while providing a mechanism to pump and dump everything from housing to rice.

Starving the demand side meant that one day those debts would start to go unpaid. The supply side thieves all thought they'd have stolen enough by then to escape all the consequences of the bust that was sure to follow. Often, though, they simply failed to think long term, at all.

Since hedge fund thieves cut mortgages into little pieces to remarket them, nobody knows who owns the debt any more beyond the CDOs, CDSes and other SIVs on institutional balance sheets, at least a third of which are no longer worth the paper they're printed on and the rest worth far less than they were purchased for.

The mortgages might not have been bad had people been paid enough to afford them and not been suckered into the non traditional mortgage scams that deregulation allowed.

[cliss]

3. I hate to say this -

there is no solution to this problem. There really isn't. They all know it in Washington. This is something that simply has to work its way through the system.

If there was a solution, they would have come up with it by now. There is none.

It's going to take years, and by the time it's done, the U.S. will be a different place. I guarantee it.

[Nay]

4. Gotta go with you there, Cliss. That's why I was against a bailout. Only

working the crap paper thru the system will fix things.

[Citizen Number 9]

8. It's not just the crap paper

The housing glut needs to be depleted by people who can actually afford to own a house, and the values of all the homes need to come back up, again, based on people working jobs and earning money, not on easy credit.

[leftofthedial]

5. I think demand-side remedies--*real* remedies, not just a $600 loan

against next year's tax refund--would accelerate recovery.

The New Deal, the WPA and other FDR demand-side remedies really helped in the previous Depression.

So far, all I've heard from repukes is, of course, more supply-side stupidity. Obama has alluded to (without specifics so far) a WPA-style program, but all his other economic remedies and his health-care plan are supply-side, "free-market" nonsense. His ideas will improve over the utter madness of the 28-year raygunomic gilded age, orgy for the rich, but they won't really fix anything.

I guess we'll have to wait and see if he keeps appointing free-marketeers or if he wises up and moves to the left for a real economic remedy.

[Hannah Bell]

6. There *is* a solution. But the perps don't want to take a loss.

They want to socialize the loss. And that's what they're going to do. It entails hardship for a lot of people, but that doesn't matter to the perps.

[shanti]

7. yes, friedmann taught them well. n/t

:(

[Art_from_Ark]

9. It doesn't matter to the perps

as long as the hardship falls on someone else

[leftofthedial]

11. that is their MO--(and the MO of all post-corporation capitalists)--

privatize profit, socialize risk.

ALWAYS externalize costs.