Taxpayers could profit from mortgage bail-out

Lost in all the verbal-overkill of the news coverage of the proposed $700 billion bailout of bad home mortgages, is that the federal government could wind up making a profit, rather than costing the taxpayers anything.

The most famous case was the bail-out of Chrysler Corporation in 1987. In the form of loan guarantees, it provided the capital the firm was unable to raise on its own at the time. Later, when the company was sold to the German firm Daimler, the federal government made over $300 million for its effort.

Lost in all the media onslaught, is the fact that each of the troubled home mortgages is secured by a home, which has value and will be sold. That will bail out a big portion of the loan by itself. Some additional funds will be raised by a deficiency judgement against each borrower for the difference between the amount of the loan and what the home sold for.

Those deficiency judgements will be bundled up and sold by the feds to private firms at a steep discount, who will then profit from collecting them.

This is how the old Resolution Trust Corporation (RTC) worked, which was the bail-out of the failed Savings and Loan institutions back in the 1990s. It did wind up costing the taxpayers some money, but nothing like the total amount authorized by Congress.

A similar outcome, maybe even a profitable one, can be expected from this latest bail-out, if Congress ever gets around to approving it.

Congress' own balky, nefarious, self-serving hand wringing is deepening the crisis by the hour. Today, the stock markets actually opened up over 100 points, but by the time all the distinguished solons seeking facetime on television had performed in Congress, the market dropped like a rock.

The time is here for courageous action--admittedly not a strong suit in Washington--and less personal aggrandizement, even if it is an election year.