I used to live in a fourth floor apartment. One day the walls in my apartment started to crack. It turns out the building foundation was settling. The landlord did not fix my walls and expect the repair to trickle down to the base. He fixed the foundation, and then the walls. We are led to believe the current financial crisis is due to mortgage foreclosures and the threat of more of them. Because our mortgages have been sold, packaged, sold as a package, repackaged, resold as another package, etc, etc into what are now called mortgage backed securities. These have been repackaged and sold so many times and ways the investment houses have no clue as to what mortgages on what real properties the securities actually represent. The fear is that any one package contains so many bad mortgages it is a money loser. They just don't know. The foundation of these securities is the individual mortgage. It is the mortgage on my house, on your house. Confirm and support the value of every mortgage and the uncertainty in the value of the securities will disappear. Instead of formulating a complicated buyout of confusing documents the government must guarantee all residential mortgages in the United States. The guarantee of the mortgages instantly removes the risk and uncertainty from the mortgage backed securities. The "toxic" is detoxified. If a mortgage is foreclosed the government pays the balance of the mortgage and becomes the owner of real property, not a pile of potentially valuable paper. This is a model that works. This is the model of the Resolution Trust Corporation that settled the Savings and Loan crisis of the early 1990's. The cost would certainly be less than the potential 700 Billion we are currently hearing. There are approximately 50 Million mortgages in the United States and currently about 2% are in foreclosure. Lets say 5% go to foreclosure, thats 2.5 Million mortgages. The average cost of a house in the US is $150,000. To buy all of these houses at foreclosure the cost is $375, Billion and there is real property in the hands of the US government (us the taxpayers). Will there actually be 2.5 Million foreclosures ? If the US governmennt guarantees my mortgage I won't stop paying it. Individuals do not want to lose their house. If the securities are no longer toxic the banks will no longer be uncertain and will again be confident to lend credit. Hopefully they will be a bit more careful. This is a no brainer. Either spend $375 Billion to own real property or spend $700 Billion to own a pile of potentially valuable paper. The paper sale will be brought to us by the same moneylenders and mathemeticians who figured out a way to make home mortgages into a toxic security. It's our choice. If you agree spread this sentiment far and spread it fast. --
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