How to Solve the Financial "Crisis"

Picking up on Devilstower's post at Kos here, it seems there's a really easy solution to this whole mess.

First, we identify the problem. It has three domino-like steps. A) There's a bunch of mortgages that everyone's afraid are going to default. B) As a result of the defaults, property prices go lower, thus causing housing prices to fall. C) As prices fall, people owe more on their homes then they are worth, thus making it harder to sell a house, which leads to either A or B.

Pretty simple. The banks and investment houses are shitting themselves because they own billions in mortgages that aren't worth as much as they paid for them. Well, that's their own damn fault. I bought Mossimo's stock once. It went down. I lost money. Lesson learned. No one bailed me out.

The banks, though, want us to buy their crappy investments from them at an inflated price. Why? Because, well, there's no real good reason. Maybe a few of those banks fail. That's the price of doing business in an unregulated, free market. If you can't handle the risks, buy CDs, not billions in mortgages.

So, instead of buying these pools of mortgages from banks, why doesn't the government just buy all the properties that are in default? Real estate, so we're told, is always a good investment. The government can spend way less than $700B to buy all defaulting mortgages. The government also has the financial power to fix those homes (if they've been abandoned and neglected) and hold them until the market bounces back in 3, 5, or 10 years.

You may say, how can they possible identify every defaulted mortgage? I don't know, public records, maybe? You may also say, well, if that's the deal, won't everyone who owes more on their house than it's worth just start to default? Probably, but you can simply put a time limit on the plan, so that it only includes mortgages in default up to a certain date.

I don't know, maybe that's too simple (it is less than Paulson's paltry 3-page boondoggle, but I didn't run Goldman Sachs into the ground after 5 years, so what do I know). But, it makes sense to me, it gets to the core of the problem, it avoids a windfall to the morons on Wall Street who suck at investing, and it prevents neighborhoods from collapsing. Maybe it rescues some people who made bad mortgage choices. Well, they don't have an MBA from Harvard, so I guess they should get a little more slack than the Rainmen on Wall Street.