Insurance for toxic assets

This was the best news I've seen today, and also quite innovative. Charging insurance for toxic assets.

The problem with all the measures being done by the world is that it never addresses the root problem, which is the mortgage crisis. All the loans interest rates are sky high. It will be a wonder if there isn't any crisis. The original plan by the US was good. Keep the mortgages low, and hold the toxic assets.

But some people have to come in and say, hey, taxpayers money. I must earn a return if I'm using it. So they come up with all the half-baked solutions when they hope they will get returns, and hopefully resolve the problem.

Obviously the problems will not be resolved. Fundamentally, this problem was caused by 1) lax regulation, and 2) taxpayers over-stretching themselves. Is it fully the bank's fault if they lend you the money to buy the property, but you choose not to repay it in full, and instead over-leverage yourself? Like it or not, you need a full solution, and not a half-baked one that will keep drawing you to pour money down a black hole.

The insurance is quite a good and innovative idea. The government charges insurance premiums, and guarantees 90% of the value. This will help them to stop the write-downs of the assets, giving the chance for the mortgage rates to stabilize. Coupled with helping to drive the interest rate lower, this will in turn help home owners to keep their homes, thus preventing them from defaulting. In the meantime, the government will collect the premiums from the banks, and banks pay for their lax credit checks.

Looks like innovative people are still around... Thank goodness for that.