The plan put forth by Paulson today is ambiguous. What he did say is that it will be big (hundreds of billions of dollars in funding) and they will buy illiquid assets from banks (which seems mean primarily mortgage related securities). Because these securities are not easily traced to individual home loans, and because other tranches of debt from the same basket of loans remain liquid I do not believe the RTC2 will be able to do much at the phycisal asset level. I believe Hank and Benny are lookig to save the banks and the investors in the securities, not the borrowers.
QUESTION: Would you rather your neighbor(s) get a deal that quietly and opaquely gets them to fair market value, or would you rather have a series of foreclosure auctions that drops comps for the entire neighborhood, hits property taxes and leaves empty damaged houses in the (neighbor)’hood?
