I’ve frequently thought that the House of Representatives is the world’s biggest open-air special-needs class, and the GOP contingent a bunch of snake-handling mouth-breathers, but if this is true, it’s an inspired move. Sure, the government is on the hook if things go pear-shaped, but insuring bad debt for private companies who agree to take it on – and charging them for said insurance – is a hell of a lot less of a budget-buster than buying up all the bad debt outright and hoping against hope that it’s worth something someday. I mean, seriously. Put the profit potential of mortgage bonds in one hand and crap in the other and see which fills up first.
If this “toxic debt” is really something that will pay out for us in the end, then the private sector should be just as happy to make a profit on it, right? Especially with the government as the reinsurer of last resort? The best part is, it’s a simple plan along the lines of FDIC insurance and it leaves the heavy lifting on the industry that got its tit in a wringer to begin with. I think the watchword for anyone working on this deal should be “elegant in its simplicity.” These Rube Goldberg three-rail bank shot schemes are where shit comes unravelled.
And again, if I’m rank-and-file at Lehman, I’m climbing a bell tower with a high-powered rifle right about now…