I was involved in the RTC process and the Feds realized a pretty high return on the assets sold by the RTC, especially after investors gained an understanding and confidence in the process. This problem dwarfs the S & L situation, but I think there are some similarities.
This problem is MUCH bigger, but aside from scale, the situations are very similar.
I placed in bold the part that many people are missing. When a plan is in place and the panic dies down, the market can begin pricing these things.
Right now, illiquidity is slowing loan underwriting, driving down real estate prices, and actually feeding the problem.
An orderly plan to do what?
From another post: The fundamental problem is that the financial sector is propped up with various types of funny money like Credit Default Swaps. Imagine a bank which didn't open any of its books to inspectors. No individual had more than, say, $100,000 on deposit, and anyone could see that the bank had $10MM of cash in the fault, but nobody knew how much money had been deposited in the bank (except maybe the bank executives, and they weren't telling). To entice people to keep money in the bank, it offered very attractive interest rates. What the owners of the bank didn't bother to tell people was that 80% of their money was going into the pockets of the bankers and their friends, and would never be seen again. Unfortunately, some depositors started to get nervous, and taking out their money, and the bank risked becoming insolvent.
Under such a scenario, would it be better to (1) do nothing, (2) have the government loan the bank some money to make the depositors happy, or (3) kill the bank, divide up its surviving assets among the depositors, and prosecute the bankers?
Choice number one would cause an essentially arbitrary redistribution of wealth. Choice number two would increase the amount of money siphoned off by the bankers, quite possibly by an amount bigger than the size of the government's own "loan". Choice number three is the only one that makes sense to me. Yeah it's ugly having people's paper assets evaporate, but the point needs to be made that the money was stolen long before the crash--depositors just didn't realize it.