Conservative Logic

An economic guide to politics, designed for post-Baby Boomers

Getting at the Roots of the Mortgage Crisis

Posted by A Hamilton on March 31, 2009

This excellent, detailed article suggests a rational approach to addressing the mortgage crisis (and with it, helping to get the broader economy on track) in such a way that the American taxpayer isn’t left holding the bag.

The economic logic of the piece is unassailable. It’s approach also carries merit because it remains consistent with traditional principles of corporate finance and governance. Sadly, our government’s plan takes a different, riskier, more expensive approach.

For all our sakes, let’s hope the Geithner plan works. But I am not optimistic. It fundamentally misdiagnoses the problem as a liquidity issues, rather than a capitalization issue. Nobel prize winning economist Joseph Stiglitz agrees.

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