No. 2: Baskets O' Loans

Is our ability to deal with the downward drop in residential real estate impaired by the fact that economic ownership of the mortgages is scattered - held "out there" in the market? How do you administer that?

Well, wait. There is someone - let's call him the Collection Agent - who is in the chain and has a list of debtors. When they make a payment, the CA checks it off, takes a little piece, and sends the balance along. At the other end there is someone - let's call him the Distribution Agent. When money rolls in the DA looks at his list of holders, checks them off, takes a little piece, and sends them their share.

So the CA knows who is going into foreclosure and the DA knows who is going to have to take less than expected.

So this time, in contrast to No. 1 below:

When it's time for the debtor to give up, he surrenders ownership of the house to the CA (which holds for the ultimate owners) but the debtor can continue to live there as a tenant. Rent is enough to cover major maintenance, insurance, taxes, and costs of administration of the arrangment by the CA and the DA, but zero is applied to debt service. The tenant has to keep the place up. The ultimate owners keep the loan for, let's say, 10 years. At the end, or if the property can't keep a tenant on those terms in the meantime, it's sold and then the CA, the DA, and the ultimately owners divvy up any proceeds.

Solving the Crisis, One Issue at a Time
No. 1: Foreclosed Homes

I'm starting to get it. The torrent of words that is roaring past on the economic crisis is at levels of 5000, 10,000, 25,000 feet. Way over the head of the problems. Leaving us with: put new money in giant institutions at the top of the pyramid and eventually we can all borrow our way back to health. And now add this: let's couple it with WPA 2009.

Nah. Break it into pieces and fix each piece.

Today: the huge inventory of foreclosed homes, which is expected to grow even larger.

Our traditional approach - throw out the debtor and auction off the property - is a fair way to get back to true value but on a massive scale it is just going to dig a massive short-term hole.

Instead: when it's time for the debtor to give up, he surrenders ownership of the house to the bank but can continue to live there as a tenant. Rent is enough to cover major maintenance, insurance, taxes, and costs of administration of the arrangment by the bank, but zero is applied to debt service. The tenant has to keep the place up. The bank does not have to write down the asset - so long as it can keep a tenant in there on that basis, it can keep the loan on its books in full. For, let's say, 10 years. At the end, or if the bank can't find a tenant on those terms in the meantime, it's sold and then the bank takes the loss. Or keeps the gain.

Takes no new cash, stablizes the residential market.

Next: homes where the debt is parcelled out and held in securitized pools.

River Bottoms - St. Charles County

There are broad vistas right up close to cities on rivers - people won't build there, it can flood, we know it well in this confluence of the Mississippi, the Missouri, and the Illinois.

So we have this, 20 minutes from downtown.

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2009 just cannot be more troubling than 2008, can it?