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Instead of inflating the dollar, the Fed should force banks, savings & loans, credit unions and other lending institutions to mark to market the assets they're

Instead of inflating the dollar, the Fed should force banks, savings & loans, credit unions and other lending institutions to mark to market the assets they're holding. Kick out people who can't pay for their homes and put those homes on the market. Until this source of the problem is corrected, all other moves will be futile. Many will lose homes but consider that, without that "bad" loan, they would have been renting instead. Now suppose we consider all payments they have made as a form of rent - then their situation doesn't look so bleak. Instead of paying off interest on a big loan, they were instead paying rent for a place more luxurious than they could otherwise afford. Not a bad deal really, but one whose time has ended. The honest bunch of us must tolerate this crappy economic environment simply because politicians fear the phrase "losing their homes". Maybe Lakoff is correct - the secret to control is framing the debate.

anamax 18y ago
> Instead of inflating the dollar, the Fed should force banks, savings & loans, credit unions and other lending institutions to mark to market the assets they're holding. Mark to market is why the institutions that went under already went under. They were cash positive, but couldn't meet their reserve requirements when the markets for their assets disappeared. Mark to market is absurd for illiquid assets. The fact that I can't sell my house today doesn't mean that it's worth $0. For illiquid assets, honest valuation involves time averaging. (This cuts both ways - the value doesn't jump just because a fool overpaid for a comparable asset.) And yes, some penalty for illiquidity.
- giardini 18y ago
  >Mark to market is why the institutions that went under already went under. They were cash positive, but couldn't meet their reserve requirements when the markets for their assets disappeared. Yes, and more will have to disappear to resolve this situation. The sooner the better. >Mark to market is absurd for illiquid assets. The fact that I can't sell my house today doesn't mean that it's worth $0. Unfortunately it means precisely that. The home is worth $0 (or less) when offered for sale on the market. Don't confuse the market's valuation with some other personal valuation of "worth". Long-term investors holding cash may justify their purchases by using time-averaging, but they are very rare and getting their attention is difficult unless you have 100s if not 1000s of homes to sell in blocks.

anamax 18y ago

> Instead of inflating the dollar, the Fed should force banks, savings & loans, credit unions and other lending institutions to mark to market the assets they're holding. Mark to market is why the institutions that went under already went under. They were cash positive, but couldn't meet their reserve requirements when the markets for their assets disappeared. Mark to market is absurd for illiquid assets. The fact that I can't sell my house today doesn't mean that it's worth $0. For illiquid assets, honest valuation involves time averaging. (This cuts both ways - the value doesn't jump just because a fool overpaid for a comparable asset.) And yes, some penalty for illiquidity.

giardini 18y ago
>Mark to market is why the institutions that went under already went under. They were cash positive, but couldn't meet their reserve requirements when the markets for their assets disappeared. Yes, and more will have to disappear to resolve this situation. The sooner the better. >Mark to market is absurd for illiquid assets. The fact that I can't sell my house today doesn't mean that it's worth $0. Unfortunately it means precisely that. The home is worth $0 (or less) when offered for sale on the market. Don't confuse the market's valuation with some other personal valuation of "worth". Long-term investors holding cash may justify their purchases by using time-averaging, but they are very rare and getting their attention is difficult unless you have 100s if not 1000s of homes to sell in blocks.