Geek points.

[dsrtao]

Eliz IMd me midway through the day and then wasn't responding, so I figured I'd give her a call. The phone was busy. An hour later, the phone was still busy.

When it was ten minutes until I was planning to leave work and I still couldn't get through, I got creative.

• I ssh'd to my desktop at home.
  
• I set the volume high.
  
• I installed the Festival speech synthesizer.
  
• I figured out how to work it.
  
• I got an error because it couldn't find the sound interface it liked.
  
• I googled for a solution and found it (a config file that plays through an external program).
  
• I had the machine say "Dan is trying to call you but the phone is busy" three times.
  
• Eliz IMd me and asked me to turn the volume down.
  

"Ping! Ping! Ping!"

Comments

[dsrtao]

No, but I can entertain cats.

If I understand the situation correctly, which I'm not sure I do, the root cause of the crisis is indeterminacy of the value of banks due to the exceedingly stupid mortgages and derivative structures built on top of them. So fixing that has to be the priority.

I would announce that any bank which wishes to accept Federally-guaranteed stability will have to turn over control. Every mortgage payment will be suspended until the house is re-assessed for current value. Mortgages are then reset to the maximum of (current loan outstanding) or 95% of current value. Interest rate on the new mortgage is set to 5%, and the period to 30 years. At the homeowner's option, a reduction in interest rate can be made against a reduction in period.

So now the homeowner has an affordable mortgage (if the house is really something they can afford anyway) or the option to try to sell the house without going underwater. The bank has a proper idea of its valuation, which it must make public.

Then I re-regulate the banks: Glass-Steagal is re-instated. No bank may engage in mortgage, home or personal loan activity in a state whose closest border is more than 300 miles from the bank's headquarters. Credit card terms are regulated and harmonized across all lenders. "Payday" loans are strictly regulated. No derivative financial instrument may have more than two categories of risk, nor can it be written against another derivative financial instrument.

For my next trick I reform the 1996 Telecom Act, enforce Network Neutrality, and start a Federal corruption probe.

[dlevey.livejournal.com]

"Mortgages are then reset to the maximum of (current loan outstanding) or 95% of current value."

Are you sure about that? Let's say that I bought my house at $300k, and it's now worth $200k. However, I've paid it down in the meantime, and I only owe $100k on the original note. Your plan would reset the amount to $190K rather than $95k (or even the full amount I owe).

[dsrtao]

Minimum. Sheesh, you want a perfect economic plan when I only have a ball of twine and a can-opener to work with?

But what is the current value?

[metageek.livejournal.com]

Every mortgage payment will be suspended until the house is re-assessed for current value.

The problem is that, at present, there are so few houses selling that it's hard to estimate a current value.

A simpler approach would be to reset all variable rate mortgages to whatever the mortgage's initial rate was. That'd give a fair chance to people who were tricked into getting a mortgage they wouldn't be able to afford later on. I'm not sure the courts would go for it, though; it might be considered a taking, meaning the government would have to compensate the mortgage holders.

Then I re-regulate the banks:

Definitely. Also, specify that financial companies can't be publicly traded; that seems to have been one of the big sources of instability over the past 25 years.

Re: But what is the current value?

[dsrtao]

I hate the idea of variable-rate mortgages. (Yes, goldsquare thinks his is the bee's knees. We don't always agree, but I still love him.) I don't want people thinking in terms of "maybe I can afford this long-term if the rates come down next year", I want people thinking "I can afford this much for many years assuming that nothing catastrophic and unpredictable happens".

The problem with public markets in ownership is pretty much the same as their appeal: they provide a layer of indirection and that can be used as an abstraction. Radical notion: perhaps we should vastly expand the bond market and close down the stock market?