Lipstick on a Mortgage.

At this moment the Fed, Treasury, and Congressional leaders are meeting to put together a federal structure to assume much of the risk of the flood of bad debt associated with soured mortgages. The Treasury plan would sell T-Bills to holders of the mortage securities in exchange for them. The idea is that Uncle Sam can hold this bad debt for a long period of time until the housing market stabilizes. Taxpayers may see a profit from this move.

Unfortunately, the Dems are now circulating an alternate plan, and putting Obama's name on it (ghostwritten by Charles Schumer, Nancy Pelosi, and Barney Frank). Preliminary reports suggest the Dem plan would have the government buy and manage the mortgages outright (like refinancing them directly with debtors). It smells like debt forgiveness for overextended homeowners. And what does Obama have to do with it? Other than he is running for President, and the Dems can use it to trumpet him as the "savior of the economy", probably nothing.

It is a sobering thought indeed to realize that at this minute the US financial system rallies or succumbs on the disposition of Barney Frank.