Obama made some nice “you take risks, you pay the price” comments today as well. But I was less impressed with his vague answer here:
Obama reacted cautiously when asked about a suggestion from House Financial Services Committee Chairman Barney Frank that the government consider creating an agency to buy distressed debt and mortgages as the Resolution Trust Corp. did during the savings and loan crisis almost two decades ago. The candidate said it is too soon to settle on a specific prescription.
“It’s a little premature for us to move forward on that, and frankly something like that probably could not get through Congress until we have a new Congress and new president,’’ he said.
Let me offer another possible answer for Senator Obama: “No.” Or, “No way.” Or, “Over my dead body.” Or “Are you kidding me? Why the hell should the government purchase the mortgages of the folks least likely to pay it back?”
Under a plan like this, banks will keep the mortgages that look most likely to be repaid, and sell the riskiest ones to the government. The profits are kept private, the risk gets shifted to the taxpayer.