A FULL COUNT AT TOP OF THE FIFTH
It's impossible to support the Paulson proposal, as is, I think.
A THREE PAGE PLAN IS TOO THIN
The appeal to complexity is unconvincing. If you cannot explain it, as you might to a six year old, you don't get money. Period.
Paulson's idea to hire 'the best and the brightest' to run a portfolio of this stuff ... isn't enough. The people at the top need to understand the plan and how it works. If they don't, how is that different than the route that got us into this mess?
At a minimum, they need to demonstrate that the plan (for reverse auctions) can "work", with a paper trial or something else. It may be that there is just "one auction, one time", as there don't appear to be investors with capital or authority to buy stuff that is rated so low and deemed so risky (certainly the big pools of capital will stay away, right?).
For each type of instrument, they need to lay out what they are going to do. Simply to request "flexibility" is not adequate.
THEY COULD BE WRONG
We could very well be in just the fifth inning of a slide that will last for at least another three...
The idea of helping a secondary market to develop is laudable, but that is not the "root cause" of the problem, except for derivatives trading.
The root cause of the problem continues to be defaults on mortgage loans, exacerbated by (a) falling home prices, (b) insufficient capital backing, (c) derivatives leverage, (d) increasingly restrictive credit, an (e) an energy price spike, and (d) a Treasury overstretched already by ... our Iraqi adventure / national security "needs".
Anyway, the upshot is that, if they are wrong, then I'm not sure that running reverse auctions is the best approach. That may have been a good thing to do last fall, alongside the half-measure called the "Hope Now Alliance", but now ...?
As in the Great Depression, the Federal Government may yet need to get into the business of buying up foreclosures ...
