Not So Fast On Mortgage Solutions

Washington Independent:

A drumbeat is building for some form of federal takeover of troubled home mortgages. Sen. Chris Dodd (D-Conn.) is leading the charge in the Congress, while Bank of America has been lobbying hard behind the scenes. Respected economists like Paul Krugman and Alan Blinder, both of Princeton, have added intellectual heft to the bandwagon.

To construct new legislation, the two most cited precedents are the Resolution Trust Corporation (RTC) that cleaned up the mess left by the 1980s Saving and Loan bust, and the Depression-era Home Owners Loan Corporation (HOLC), Blinder's favorite, that took over some four million mortgages in the 1930s.

Neither precedent is fully on point. The RTC was a mortgage seller, not buyer. When the government paid off the depositors of bankrupt S&Ls, it automatically acquired a mare's nest of dicey commercial and residential mortgages. The RTC then ran one of the biggest fire-sales in history, bundling up assets into big collateral pools that were sold off en masse to Wall Street and other big investors. Inevitably, many of the firms that made a bundle creating the crisis made a second one on the way out.

Read the whole story: Washington Independent

Comments

[Oldbuck]

It seem to me we are closing the gate after the horse is out. Bing involved in the 1980 Saving & Loan mess and RTC this was the same type situation Regan was elected and we start to deregulate the Saving and Loan which was design to make home loans. By deregulation they all though they were comercial lender and went out and loan a lot of money to commercial builder for strip center and motels and apartments of which they did not know one thing about, they even loan the builder the money to pay the interest on these loan so it looked like they were make big incomes. Having no regulation in the mortgage originator and Investment banks jump on this and started make loan that didn't amortize and made no principal reduction. Deregulation has brought this country to the brink of disaster

[JohnFromCensornati]

A mare's nest?
Where did they dig that up?