Why Is the Bad So Bad

Thanks to SK for forwarding this article from the Fool walking through the nuts and bolts of why the Bush “bail out” is so bad. If you have a few minutes and are interested in a quick summary of some of the implications of the current attempt at putting a band-aid on a compound fracture to save some face on wall street, I would take a look.

Bush’s Bailout Bait-and-Switch

One note though: I think stopping the wave of ARMs is not a bad idea, I just don’t know why this can’t be done through private sector action. Why can’t the holders just re-negotiate terms with homeowners en-masse if necessary? I know there are challenges of collective action among other things, but if these financial institutions are sophisticated enough to tranche up and price a CDO^3, can’t they pick up the phone and talk to a homeowner who is about to be pushed off a cliff?

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