Saturday, September 20, 2008
Toxic Asset Dump (TAD) for the USSA
The punitive pricing of any assets acquired by the TAD should discourage future reckless lending by the banks. Requiring the individuals who took out excessive mortgages to live with the consequences of their actions is the best mechanism for discouraging future reckless borrowing by would-be home owners. They were consenting adults. There is no efficiency or fairness argument for the tax payer to cough up resources to enable those who borrowed too much in the past to continue to live in houses they can no longer afford. Individual over-leveraged home owners also don’t constitute a threat to systemic stability.