EuroPac.net - We are being told loudly and repeatedly that the gargantuan mortgage bail-out package is necessary because illiquid mortgage-backed securities are clogging our financial arteries, threatening the economic equivalent of cardiac arrest. The idea of the plan is to transfer these supposedly valuable, but currently unmarketable, assets to the government so that private institutions can freely lend once more. The monumental flaw in this argument is that the mortgage backed securities are in fact highly liquid, just not at the prices the owners would like to receive.

Mortgage bonds are just like houses. They won’t sell if the owners stubbornly refuse to drop the price. However, they can find buyers if they acknowledge reality, and lower their expectations accordingly. Read More