2008 Oct 30th

The Best (Yet) Solution to the Mortgage Mess

Someone’s Been Thinking the Problem Through

There have been numerous articles and explanations in the media of the reason we as a country and our global partners are in such a state of financial ruin.  While most commentators and economists agree that the burst of the housing bubble caused the mortgage crisis which, thanks to securitization, snowballed out of control, there have been few suggestions as to how to fix the problem.  Here is the best one I’ve read so far:  Mortgage Justice Is Blind.  It’s written by John D. Geanakoplos, an economics professor at Yale and Susan P. Koniak, a former law professor at Boston University.  I was glad to see Prof. Koniak was one of the authors as BU Law is where I earned my law degree.

See also:  Under Water Hoboken Condos

If you’re interested in learning more about the state of the mortgage industry and what it’s done to the economy, I recommend this great blog – Diaries of a Mad Mortgage Broker – by Dale Siegel.

  1. Keith

    Brilliant article and exactly the kind of root cause approach we’ve lacked. It’s not about saving homeowners (or banks etc.)who foolishly overextended but about protecting a full scale meltdown by means of excessive foreclosures. Rational lenders would not behave this way and it is clearly the securitization that is both tying our hands and accountable for the lax lending scrutiny to begin with.

  2. Dmitri

    Root cause of economic crisis in US is the fact that US has been living on credit with zero collateral for way too long. Lying to everyone that our economy and “ingenuity of our proud peopleZ” or some such hurray-patriotic BS is the collateral for our worthless paper (weather it is our currency or securities).
    Helping defaulting homeowners will not solve anything it might put off the real disaster for now until current crop of politicians can retire from their offices. Will it help in any way to restructure US economy and put it on a road to sustainability? No!
    As long as economics professors and their posse continue to preach that perpetual economic growth based on consumer credit-spending is sustainable economic model we are going to head towards a catastrophe the hints of which we just saw in a last few months.

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