Wednesday Morning - Bad Banking & Bernanke

After already spening enough money to make 8 Million Americans Millionaires ( that’s what $8Tn is !) , the government is NOW looking to step in and buy up all the toxic assets Paulson said they were going to buy last year . This is called "leverage" - Paulson and Co. allow the situation to get so bad that you are forced to give him a blank check for $700Bn to " Fix It " and the Bush administration levers your cooperation into $8Tn of spending, NONE of which actually goes towards buying up any of the bad assets that we were told was critical to the system’s recovery in the first place.  So NOW we are going to be writing a $1Tn check (the opening, pre-levered estimate) to take the "bad assets" off the books of the surviving banks.  Don’t get me wrong, we did a similar thing with the Resolution Trust Corp and that worked but, knowing that history, wouldn’t it have made sense to have done this first? Had I known the government was willing to spend $100,000 times 80M households over just a 4 month period, I would have been more generous in my proposed program last April that solved the housing crisis by merely lending $100,000 to the then 4M homeowners at risk of foreclosure (a mere $400Bn stimulus) who could be saved by cutting their mortgage down with a principal reduction.  In September, as the stiuation got worse, I pointed out that it would be much cheaper to just guarantee the mortgage payments on all 5M homes that faced foreclosure - a cost of " just " $5.8Bn a month that would effectively clean up all the balance sheets without necessitating taking possession of a Trillion dollars worth of properties and dislocating their owners.  I will make one final pitch for my idea, I won’t rehash what is in the linked articles but, conceptually, if you offer $100,000 or more (since the government is 10x more generous than I proposed already) to reduce the average homeowner’s mortgage payment by 50% to anyone who wants it (in exchange for $125,000 of equity in the home and 6% interest deferred to the eventual sale) you can allow the homeowner, with their government " partner " to refinance the remaining balance at 5% or less and save roughly $800 PER MONTH in payments.  Now THAT is stimulus!  The bank gets $100K in cash back against the principal on the home, the LTV ratio of the home drops by $100K…