And most electric companies are guaranteed a profit because they are a state-sanctioned monopoly.
but then that would never have worked, as it's a form of socialism. Any idiot can face a crisis - it's day to day living that wears you out.
Something close to that was Barney Frank's proposal to allow people to reduce their mortages to 85% of the current market value, The government pays the banks that 85%, the banks write off the rest, and the first x of any eventual gain on a later sale of the home goes to the government. Given foreclosure and resale costs, the banks effectively get more than what they'd get by foreclosing. The homeowners don't lose their home, and in the long term the government shouldn't lose that much money since it's holding mortgages at, on average about two thirds of the nominal peak price, with the right to capture much of the eventual upside. But the upfront costs would have been much more than ten billion. A very watered down version of this plan eventually passed, but it was done in a way that very few would qualify for paticipation.
My payments go from $1084.19 to $1411.18 per month.
Let's foreclose on the house, put it into the hands of a "Custodian" and charge a reasonable "Capital Rental" to the "Occupier-formerly-known-as-Owner", and then index-link the rental.
At an initial "Capital Rental" of 4% the finance cost is $667 per month: at 3% $500.00 and so on.
Anything the Occupier pays in excess of the "Capital rental" due buys him Units, and if he wishes, he can always pay the Rental with Units if he doesn't want to, or can't, pay in cash.
The outcome is Units of a "quasi REIT" asset class which the owner of the distressed debt can sell off to long term investors.
The lower the Capital Rental is, the more affordable it is, and the more likely it will be paid.
I reckon a 2 to 3% (index-linked) return could be quite achievable for Units in a "Pool" of over a million homes....
Safe as Houses..... "Any economic unit can emit money. The serious problem is to get it accepted" Hyman Minsky
The second possibility leads to inflation, but it saves the institutions and allows the system to continue to function.
The first possibility would have knock-on effects as one company's bankruptcy immediately impairs assets on everyone else's balance sheet. You could conceivably end up with everyone filing for bankruptcy protection. That would also be a solution: if A owes money to B who owes money to C who owes money to A it can all be netted out to zero but the required disclosures will only take place if A, B, and C are all in bankruptcy court. But it everyone is bankrupt there will be no credit creation and, again, the economy will grind to a halt.
Another way to get the required "circular claims" disclosures to be made is for the government to pull a Roosevelt:
On March 5, 1933, the day after Roosevelt's inauguration, he called a special session of Congress which instituted a mandatory four-day bank holiday. This act provided for the reopening of banks after federal inspectors had declared them to be financially secure.
The credit institutions have a wealth of information about the financial system (and those mortgages). You want to at least save the institutional memory in those banks.
This can be achieved by letting them all go bankrupt and then buying up the pieces. But the government would have to have a "public holding company" or something like that to be able to own companies. This is not the case.
Except that the Dodd plan creates that authority, while keeping within the market narrative and thus being palatable.
One more point: this bailout plan has been designed for the Financials, but other corporations will want in on it. When the SEC decided to ban short selling of Financial stocks, some industrial companies successfully lobbied to be included in the short ban. Who is to say that General Motors won't ask the Treasury to buy some Shitpile™ from it? A vivid image of what should exist acts as a surrogate for reality. Pursuit of the image then prevents pursuit of the reality -- John K. Galbraith
I ahve the feeling that nationalization would have a slightly higher chance to succeed... but a Dood program with a robert Reich approach investment during the transition has similar or higher.
IN any case, I am not still completely sure it woudl work..
So, Is Euroep , China and Japan ready for derivative meltdown? and for a huge contraction in US demand?
These are the two questions we should be worried here. I know about Spain.. no big deal about the ocntraction demand, but given that we are in the same bubble process than the US, a credit default will eb really bad for Spain..
the US falls, Spain goes with it.. at least we make some kind of deal with the Chinese and convince them that we are in better shape than the US and can send ther saving around here :)
A pleasure I therefore claim to show, not how men think in myths, but how myths operate in men's minds without their being aware of the fact. Levi-Strauss, Claude
