Wednesday, October 15, 2008

Robert Peston mentions the Hedge Fund problem

Robert Peston reports that Mr Paulson (G Warming Bush's Treasury Secretary) said he wanted to "kill the bad Hedge Funds and heavily regulate the rest."

This is because the astronomical "value" of these funds threatens to overwhelm the financial system by multiplying the losses as and when institutions fall over. Which is why Paulson wanted to try to buy toxic assets with his pitiful $700 billion of taxpayers' hard earned, which amounts to less than 1% of the total "value". We do not seem to hear so much about this idea this week.

A better use of the money, both here and in the US, would be to use tax money to buy up unpayable mortgages at a fair price, based on the replacement value of the house, weighted by a factor related to its age, site and condition. That way, the money is spent into the real economy instead of la-la land, the householders get to keep a roof over their heads, local authorities get to save costs of housing homeless families, (it costs 10x as much to keep people in B&B than it does to build a house for them)and the threat to the banks from mortgage defaults is averted (though the banks are going to lose something from inflated mortgages. Shed a tear).

And it is official Green Party policy - Right to Rent.

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