One of things that I was always curious about is why the govt didn't restructure mortgage debt and re-value property back to pre-bubble levels
It would have cost the government $2 trillion to buy every sub-prime mortgage and retire it.
But that's Communism
Instead, the government (by way of the private bank known as "The Fed") gave $16 trillion - free and with no strings attached - to Wall Street, the very people who engineered the destruction of the American economy in 2008.
US GDP in 2012 was $15.68 trillion. You're saying the US government gave away more than a year's worth of productive output? You'll excuse me if I say citation fucking needed.
They lent the money, they didn't "give it" to the banks. The difference is that the Fed got the money back, whereas buying $2tn of debt would result in the Fed having to create $2tn.
Loaning someone money without interest is the same as giving them the market rate of interest, which in the case of the banks after the housing bubble bust was somewhere around a billion percent a minute, because all of the banks were insolvent and completely uncreditworthy.
To make it even more obviously a gift, a good bit of it was used to buy treasuries. If I loan you $100 at 0% interest, and you loan it back to me for $5 a day, aren't I just giving you $5 a day?
I think what he was actually getting at is the Discount Window. These are often very short term loans, perhaps a matter of minutes, made to cover a short term liquidity drop. If you add it all up over a year, it could very well add up to several trillions without adding those trillions to the GDP.
It all gets paid back with interest, though. None of this is anything new.
IIRC Oakland is looking into using eminent domain to seize mortgages (not the physical property that's mortgaged, but the mortgages themselves) so it can then forcibly refinance them on terms better to the borrowers.
I believe the city of Richmond, CA (in the bay area, green party mayor) has already passed a provision to use eminent domain for the same reason. Oakland is following their lead.
And I believe the FHA and all the banks have threatened to end all future mortgage lending in the area if the courts actually let them go through with it. I wonder what requiring cash up front will do to home prices...
It would have cost the government $2 trillion to buy every sub-prime mortgage and retire it.
But that's Communism
Instead, the government (by way of the private bank known as "The Fed") gave $16 trillion - free and with no strings attached - to Wall Street, the very people who engineered the destruction of the American economy in 2008.
That's known as Capitalism