Leave it to the venture capitalists to create a way to make money and solve a real societal need.
This is an idea that from this perspective even staunch GOP capitalists can support—said with tongue firmly planted in cheek:
Use the power of eminent domain
- To seize overvalued (that is, underwater) real estate backed loans
- To pay the current owners (investors) of these loans the fair market value of the loans as is constitutionally required by the law of eminent domain,
- Then the new owners of the loans write down the principal of the loans to a reasonable value that approximates what was just paid to the original owners of the loans, and
- Presto the homeowners stay in their homes and their homes have some minimal positive equity—motivating them not to default and avoid foreclosure, and possibly even to spend, all to the good of the economic recovery.
Who pays the price of this process?
The current owners of the loans are compelled to “recognize” the loss in value of their investments in these loans.
One harsh example: The owner of a second loan on a property where the first loan is underwater would be paid close to $0.00 for that second loan as economically the value of that loan is next to $0.00. [Read more…]
