You misunderstand.
When the Gov't removes toxic debt from bank books, it frees up banks to issue mortgages again. The reason house prices are falling is that banks are issuing mortgages at a snail's pace right now.
Once banks begin lending again house prices will stabilize and slowly inch up. Then the Gov't can again sell these toxic mortgages back into the market and we can get BACK a good portion of the $700 billion.
Housing prices need to fall back to earth.
The bubble needs to pop.
The trouble with delusional theories is that they always fail.
You neglected the possible alternative: since criminals have too many rights, there is literally nothing for the fake mortgages scam to occur all over again.
Specially if Bawney Fwank and henchmen insist that making unsecure bad mortgage loans is a necessity, and eliminating that possibility is "mean-spirited."
Remember, that the making of bad and unsecured loans was a federal requirement by law, failure to comply punishable by fines and jail time, and no one has suggested fixing that.
Since there is no “price to pay” for making all these toxic loans (as the Gov’t is going to buy them), who’s to say these greedy banks won’t go out and extend credit to anyone with breath?