This is addressed to those who argue that the 451-page monstrosity working its way through the Congress is not really a “bailout,” but rather a “purchase” of “assets” that will always have market value, because real estate is always worth something. Putting aside the philosophical questions about whether the government has any business intervening in private transactions, or whether such interventions only encourage future moral hazards, I’d like to bring a more practical issue to your attention:
You’d better hope that these exotic packages of mortgage-backed securities don’t contain many properties from Saginaw, Michigan like the one that just sold on Ebay. I suppose $2.20 is technically more than “zero,” but I’d wager it’s a whole lot less than what was owed on any mortgage. And, while you’re at it, better check for anything in Detroit — like the house I blogged about a few weeks back, that sold for one whole dollar.
And while the government is going on a shopping spree for new “assets,” maybe their next purchase should be all those unsold cars that the automakers have been sitting on. After all, those will have value some day, too, right?
Don’t laugh. I bet some legislator from Michigan will propose an “unsold auto asset” purchase next week.