White House pledges help for subprime mortgage borrowers (for brownie points)

Sad, but true.

This is a politically expeditious course of action – portray the image of coming to the rescue even if the markets know it’s somewhat futile to interfere

I think of the underlying game as “seek the sucker”: sucker number one is persuaded to borrow too much; sucker number two is sold the debt created by lending to sucker number one; sucker number three is the taxpayer [that’s you!] who rescues the players who became rich from lending to sucker number one and selling to sucker number two.

It’s more like four or five suckers, each paying a premium to the previous for the privilege of holding an asset for a split second. And it’s profitable to do so, until the change in the market value of the collateral turns negative. Then you start playing accounting games.

The plethora of intermediaries has dispersed, so it’s easy to place the blame on them. Hold yourself out as the white knight, and score a few brownie points in the process. Unfortunately, baked goods aren’t good collateral for securitized loans.

UPDATE: Meanwhile, this isn’t going to help matters, but I’m sure the resulting spin will be fun hearing. At least government workers won’t take pay cuts (even if everyone else does).

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