What just happened?
The stock market is up nicely this week. Goldman Sachs seems to have really cashed in. Several banks paid back the emergency Federal funds - with interest. So everything is going to be OK now, right?
Except that nothing really changed.
The players used obscurity to sell securities at made up prices. The buyers preferred the obscurity. It helped them to mark em up and resell. Extremely unstable - only bad for the last buyer, the one who looks in the bag. We could regulate like hell to stop this. But I have another suggestion...
Tax the obscurity.
The true value of the so called 'toxic assets', was not risk sharing.
No, no, no. It was obscurity. It was the ability to say "We don't really know what mortgages this document represents, but there are just so damned many of them that they gotta be safe."
Then when it came crashing down, the story was: "We don't really know what these assets are worth. We have to sell them to the government at a made up price, so we have liquidity to get back to our real business." Whatever that was.
Well, I have spent months listening to this BS. With mortgages come mortgage payments. So whoever owns a security based on a skillion questionable mortgages is getting pieces of mortgage payments. He may not be getting each piece individually, so he does not know which mortgage is paying and which is not. But SOMEONE knows which mortgage is paying. Because that SOMEONE is splitting up the payments n-ways, combining those itty-bitty subpayments into a nice new payment to the owner of the mortgage slices. And then those payments get split and recombined...
And that guy, the guy doing the splitting, is profiting from the obscurity of the process. And that is the obscurity that made the system unstable.
So tax the split of the mortgage payment. Every time it splits.
Think of it as a value subtracted tax.
And by the way, the IRS is going to make you splitters file detailed reports about your lovely splitting deals. Not exactly public reports, so your sacred ability to conduct your affairs in private will not be impinged upon by an nasty new regulatory body. But you are still going to have to spill the beans. Maybe splitting those payments 20 times will get so expensive, well, you might just find a more useful way to make money.