Tuesday, September 30, 2008

Going for broke...

I think the US is right to not do the bail out

1. the moral hazard is too high to reward bad banks
2. some banks go bust - so?

in this scenario, my understanding is that
someone will realize their assets
by acquiring them cheap -

that organisation will not foreclose on all their
customers mortgages because
a) if anyone does that to a significant size of hosuing stock, the
price will fall so fast they wont realize much money
b) the people they foreclose mortgages on will then buy the property
for cash cheap

instead, they will foreclose on hopeless caes, extend the loan on
others and quite a lot of people will find themselves renting
accommodation they were formerly trying to buy, but without a debt.

the price for buy/rent, and the confidence level in remaining loans
will stabilize....

making the organisation that acquires the bust banks,
the government makes no sense to me at all. bailing out broken lenders
makes even less sense.

alternative: make usury a crime as well as a sin:)

No comments: