What still doesn't make sense to you about the financial crisis?
http://www.thisamericanlife.org/radio-archives/episode/355/t...
http://www.thisamericanlife.org/radio-archives/episode/375/b...
http://www.thisamericanlife.org/radio-archives/episode/365/A...
*My personal favorite -http://www.thisamericanlife.org/radio-archives/episode/405/i...
It also would've helped the freefalling house values because it would have given underwater homeowners a chance to be part of the solution rather than part of the problem.
We all ended up buying the debt back anyway, we just used the federal government to do it.
I suspect the reason has to do with difficulty inherent to unbundling existing derivatives contracts in order to isolate "your" mortgage, but I'll circle back when I get an expert opinion.
I'm sure this isn't allowed contractually, but there was a lot of paper torn up by the federal government during the bailout. I would argue that this change would have been less damaging to all parties invovled.
Consider that everyone that owned a home would be scraping every dime they have together to put money into this system. There would still be loss, but this would stop the panic and add a floor to the housing/debt markets.
On one side we have underwater homeowners that have no option but to walk away. On the other side we have cash strapped banks that are holding on to debt obligations that are worthless because homeowners are all walking away.
It seems to me that giving homeowners a way to buy into this system rather than walk away from it would benefit everyone.
I understand there is no legal/contractual method for this currently. I was suggesting adding one.