The liquidity issue is caused by the declining value of the mortgages underlying the CDO, not the numnber of foreclosures. The value is lowered by Moodys downgrades, FAS 157, and revenue below projections. This plan further reduces revenue, and hence should create a whole new round of losses for the big Wall Street firms.
If the plan has any real impact on the real estate market, it will bankrupt CITI, Morgan Stanley et. al. The plan only deals with the revenue side and completely misses the asset losses – unless Ben is going to allow the CDOs to remain at par, or pay the difference.