Stop this craziness and restore accountability and order to the financial sector!
There are several simple ( albeit painful in the short term ) steps to solving the current financial crisis:
- DO NOT offer government money to failing(ed) financial firms. Let the ones who took advantage of the government's misguided attempts to increase home ownership pay the piper. If insolvency is the result, let it happen. Any bailout would have an extremely detrimental effect on the US dollar exacerbating the fiscal pain millions of Americans are already experiencing.
- Allow solvent REITs, private equity funds, strong banks and anyone else to buy the bad mortgages off of bankrupt firms. The collapsing institutions will be required to sell off assets to pay their creditors. This would allow firms which DID practice restraint and actually have cash to buy mortgages and the foreclosed properties for pennies on the dollar. These surviving firms can then flip the properties for below (normal) market prices and still turn a nice profit. This will get people into homes WITHOUT forcing them to go into debt up to their earlobes.
- Government must NEVER EVER again get into the business of making it easy for profit driven firms to make bad decisions jeopardizing their stability. That means never again have quasi-governmental entities buying whatever garbage it is that the private sector was selling.
The problem wasn't under-regulation of lending companies. The problem was a lack of basic credibility requirements on loans that Fannie and Freddie would buy.
The problems wasn't credit default swaps. A CDS only becomes a problem when one party can't afford to hold up their end of the bargain. This came as a result of bad lending practices ( encouraged by the government ), not as a result of the CDSs themselves.
Let's take the near term pain of bank failures and stock market losses to ensure that these mortgages are cleansed from the ledgers and turned into something positive. The inflationary alternative is absolute GARBAGE.