xudash
09-30-2008, 11:31 PM
So I'll give you the cliff notes (and I wish I had thought of it):
1. No direct bailout, meaning the federal government does not buy the paper.
2. The government pursues a liquidity play: invest in institutions via a preferred share instrument.
3. Free cash flow goes to that preferred issue firstly, essentially with any preexisting debt issues subordinated to the preferred dividend, which would carry a nice yield for the tax payers.
4. Then you let the market do its thing. In other words, don't allow a bunch of bureaucrats in DC take control of all these mortgages throughout the US. They will screw it up. History shows that they will screw it up. The companies that marketed the mortgages, that were driven by fees and not credit worthiness and that now want to survive and move forward, know their markets and, with proper supervision/regulation, will reprice and reset property values and mortgages one by one. Don't think that this will be slow; this activity will occur at a high rate of volume. It will take time given the size of the problem, but the market will work efficiently to work this thing through.
5. As the companies work the problem to the end, the preferred issues are retired.
6. And life moves on.
All this has me recalling some of the RTC abuses that took place during the S&L crisis.
Having typed this, I'll excuse myself to make a drink, knowing that our friends inside the Beltway will, indeed, end up with a structure that calls for buying the paper. At least it remains a free country, where my liver and I can retire for the evening to commiserate, laugh and cry, all at the same time.
BTW, the above idea came from Vegas. It's Steve Wynn's idea. He knows a little something about being a good businessman and about making money.
1. No direct bailout, meaning the federal government does not buy the paper.
2. The government pursues a liquidity play: invest in institutions via a preferred share instrument.
3. Free cash flow goes to that preferred issue firstly, essentially with any preexisting debt issues subordinated to the preferred dividend, which would carry a nice yield for the tax payers.
4. Then you let the market do its thing. In other words, don't allow a bunch of bureaucrats in DC take control of all these mortgages throughout the US. They will screw it up. History shows that they will screw it up. The companies that marketed the mortgages, that were driven by fees and not credit worthiness and that now want to survive and move forward, know their markets and, with proper supervision/regulation, will reprice and reset property values and mortgages one by one. Don't think that this will be slow; this activity will occur at a high rate of volume. It will take time given the size of the problem, but the market will work efficiently to work this thing through.
5. As the companies work the problem to the end, the preferred issues are retired.
6. And life moves on.
All this has me recalling some of the RTC abuses that took place during the S&L crisis.
Having typed this, I'll excuse myself to make a drink, knowing that our friends inside the Beltway will, indeed, end up with a structure that calls for buying the paper. At least it remains a free country, where my liver and I can retire for the evening to commiserate, laugh and cry, all at the same time.
BTW, the above idea came from Vegas. It's Steve Wynn's idea. He knows a little something about being a good businessman and about making money.