[sayuncledave]

Ms. Bair is of course incorrect. At this point, the one and only thing that will truly help the Mortgage industry get on a “sounder footing” is to force mark to market values, and let those whose books are truly full of holes use bankruptcy procedures, and clear the deadwood. That will be a start. Another great thing would be a move to again set a fixed amount for down payment, say 20 or 30%, as a condition of the mortgage. I’m admittedly an idiot about finances, although I am learning, thanks wholly to Karl Denninger. It’s nothing grandiose. Just have the banks and mortgage companies express exactly what their paper’s worth. If there’s fallout, accept it. Beats the heck out of the current house of cards.

[DB]

The government should not be setting the down payment requirements (or setting any other lending requirements). Nor should government be guaranteeing the loans. The market should determine the loan requirements. If the lender wants to make risky loans, have at it. It is their money to lose as long as the government doesn’t step in to bail them out.

Fannie and Freddie guaranteeing loans is a large part of what made all this possible. It is easy to make risky loans when it isn’t your money you are risking.

[Mr. Jeeves]

Just have the banks and mortgage companies express exactly what their paper’s worth. If there’s fallout, accept it. Beats the heck out of the current house of cards.

As Denninger has also said, if this happens, inconvenient people will take a beating. And inconvenient people are not in the habit of taking beatings that their hired Senators can foist off on the taxpayers, instead.

[NoControllingLegalAuthority]

To force banks to mark all of the real estate values down to market would mean instant insolvency for all banks. There would not be a financially solvent bank left in America. Most mortgages are upside down with negative equity in today's market.

The practical result of such a move would be to reduce assets of banks to values far below their liabilities.