It seems to me the taxpayers are getting a raw deal in buying up all the bad mortgages. If they pay the banks what the properties are worth today (pennies on the dollar) the banks will be no better off than if they kept the mortgages themselves. But if we pay higher than market value for the properties, the taxpayer will have to wait decades to recover their investment, much less show a profit.
We need to do something so there are not wholesale bank failures that wreck our financial system. But if one bank fails, the economy won’t collapse. And if two banks fail, the result will probably not be chaos either. Somewhere in the middle, there is a just-right number for valuing the properties that lets some banks fail, and the rest go *Ooof!! *, but they survive to build a stronger, more responsible banking system.
My point is, in order to make an example for the future to deter this kind of irresponsible behavior, a not small number of banks need to fail ( the bulk of the depositors would be protected by FDIC). Can we arrive at a valuation of the bad mortgages that would do this, or does the taxpayer have to bend over and take it in the ass and try to save all the banks?