Re: 14 million empty houses
I was trying to keep my post relatively short.
Once the US Treasury acquires a bad mortgage, they should instantly sell it to the highest bidder.
At most, 10 million homes would foreclose at an average loss of $150,000, which is about a 40% price decline.
The market would clear instantly.
There might be millions of empty homes, but only because of massive overbuilding.
And, every empty home would be owned by a speculator who is actively searching for a long term buyer.
In exchange for taking on the bad loans, the US Treasury would demand to step in front of all stock and bond holders of the companies that now own these toxic mortgages.
The US Treasury would then instantly sell its (probably 100%) interest in AIG, Fannie, Freddie, Citi, etc. to the highest bidder.
Within 24 hours, each of these companies would be operating as usual, with new owners.
The original stock and bond holders would be wiped out, but the “new” companies would have perfect balance sheets.
Obviously, new regulations and transparency would be required for the “new” companies, but that's an essay for another time.
I don’t think we are going back far enough on how this got started. The fact that most of the industrialized world is sucked into this points the finger at Central Banks (US, Europe, Japan). For the last fifteen+ years they kept telling us inflation was running at 1-3%, while real estate prices were going up 5-10+ percent every year...and they never added that into the inflation numbers. If they had inflation would have been much higher and the central banks would have been compelled to raise interest rates years ago...and this global real estate bubble would never have occured.