I received the latest copy of Condé Nast Portfolio yesterday and read about the article Stiglitz wrote. In there he advocated for the homeowner’s version of Chapter 11, though I did not see any term relating to writedowns. He’s saying he wants to eliminate the asset by Chapter 11, not writing it down based on percentage.
As a homeowner myself, I see this as definitely the cure, especially tailored for the ones who are in the grinder at the moment. Those who walked-away will probably never get their homes back, but those who are still hanging in there waiting for a savior, a solution based on Stiglitz could possibly work.
How? The next president should enact a law targetting those numbers.
Then, there’s another angle into it that needs to be considered. According to a Stiglitz book I read a few years back, rule of law and trust are some of the main ingredients needed to have a sound and vibrant market. Take one away and the market will probably tailspin. Fixing the mess by revamping the law could restore trust in the market. Something to the effect of a New New Deal FDR-style could be taken.
And then there’s the issue of spending. Have you seen the NASA MMO RFP? It came to me as some sort of a message that budgets are being slashed, held tight by some unknown fear. Again, why would a government agency tighten its belt as if things are going to the great depression? We’ve been there before and we know the solution: SPEND, SPEND, SPEND.