m&m
I am not 100% certain, but I believe the underlying issue is that banks who oversupply the market with distressed houses will cause the rate of depreciation of assets backed by mortgages to increase the rate of the imploding credit market and thus the rate of economic shrinking and ultimately the total amount of economic shrinkage. If a bank sells a home at a much lower value then it had assumed when assessing its assets, then it must readjust this assessment of its assets even lower. This means it can not borrow as much from Uncle Fed, It can not lend as much to you and me, It means investors lose more, it means possible bank rupture if everyone starts to sell at market demand prices. It means stock market collaspe and world wide recession (Maybe world wide recession then stock market collaspe).
