The House voted down the hastily thrown together bail-out the banks proposal. I have 228 Thank you notes to write. (Are Thank You emails considered proper etiquette?) So the question is what next? Where do we go from here.

I'd like to see the the problem solved through massive federal deregulation. Give banks the ability to break open existing Mortgage Backed Securities and repackage them. Let them mix and match the best mortgages the have to create something salable if the need to raise capital.  Let them shuffle loans between MBSs to create something of potential value to buyers.

Finally. Stop the creation of new sub-prime loans. Or at least prevent them form being securitized. In fairness to the banks this would have to be accompanied by removing the regulatory obligation to issue sub prime mortgages.

There are a lot of You Tube clips floating around with Democrats praising Fannie and Freddie and the CRA for doing such a great job creating affordable housing. But that's a lie. If the housing was affordable - that is if the people who got the loans could afford to pay them back - we wouldn't be in this mess.

The federal government needs to begin the immediate sale of all equity and assets it has gained though various  bail-outs and buy-outs.

Lastly, privatize Fannie and Freddie. No more implied federal guarantee. No more "Government Sponsored Enterprises." Meet their current obligations (because you said you would) then throw them overboard and let them sink or swim as private companies.

Get government out of the way - allow for maximum creativity and flexibility and serious consequences for fraud.

Posted by: Stephen Macklin at 03:48 PM | No Comments | Add Comment