What's really happening here is a bailout of bondholders. If folks don't pay their mortgages, they default, the bondholders can't get paid and might sue for fraud. Many if not most of mortgage backed securities sold were loaded with junk loans (walking defaults) despite having AAA ratings that elevate a security to nearly risk-free.
Not satisfied with wasting close to $200 billion of taxpayer dollars bailing out holders of Fannie and Freddie Bonds (notably PIMCO and China), Geithner is back at it with another proposal sure to cost US taxpayers plenty if adopted. The proposal this time is for taxpayers to pick up 63% of the cost of mortgage principal reductions.
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Mish's Global Economic Trend Analysis
