Essentially from what I have been reading the government is going to set up the equivalent of the Resolution Trust Corporation which existed during the S&L crisis. This entity will buy up bad debt, which, from what I have read is mortgage debt gone sour.

In any event I just find this amazing because mortgages are fairly well secured. First they're secured by the debtor (who has apparently defaulted), then they are secured by the land/property (which apparently has declined in value), and, at least in the case of sub prime loans where the debtor put up less than 20%, the loan is further secured by PMI which is essentially mortgage insurance that the debtor pays to the lender for the benefit of the lender. (What were all of these people paying PMI for to begin with?); essentially between foreclosure and the insurance company, that just isn't enough, they need the government bailout too.

It seems that the markets have become prone to bubbles; whether its stocks, housing, commodities....

I opine that the root of the problem is wanton speculation.

To reign in speculation, I suggest increasing the short-term capital gains tax. As many of you know, if you hold an asset for less than a year, its essentially taxed like income. If you hold it for longer than a year it gets taxed as a long term capital gain (which is a much lower rate). Housing is an exception because you must hold it for two years and you get an exemption on your primary residence of up to $500K for a couple and $250K for a single individual.

Notwithstanding, the rules could be changed to lengthen the time to qualify for long term capital gains and/or the rate on short term capital gains can be increased.

I suppose the 'they're too big to fail' argument works, but this bailout seems to be becoming a habit....

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