ML-Implode News - Kass: Nationalize The Monolines

The solution to the emerging failure of the monoline insurers that hold insurance on homes, mortgages, bonds and derivatives is straightforward but requires bold initiatives and imagination. It is a public/private permutation of a Resolution Trust Corporation-type facility that will somehow acquire the equity of the leading monoline insurers and will, with or without private sector partners, retain their portfolios of financial asbestos and sell them over time.

That's great, Doug. I mean, for everyone except taxpayers (who are still paying interest on the bailout of the S&Ls, the last time this sort of genius "fix" was utilized).

Kass seems to apprehend the scope of the problem, but apparently not that there is no "fix" that doesn't also hurt someone else... or simply postpone the pain. For example:

This solution will, importantly, serve to retain the AAA ratings of the individual bonds -- the U.S. government has the highest bond rating extant -- and the portfolios insured by MBIA, Ambac, MGIC Investment, Radian Group and PMI Group.

Well, that will buy us what, 5 years, 10 at best, until the rating of the US Federal Government itself slips because it too is insolvent?

He closes with:

I am absolutely positive that these two solutions would have a momentous, immediate and profound impact on equities. On Friday night's "Kudlow & Company" I suggested that stocks would literally rise by 10% overnight.

Just one question for you, Doug. Is the goal here to help the stock market today, or the American people and the long-term health of the market? Are you really saying the priority driving your proposal is to juice the stock market? Seems ill-advised, to us. Seems like the kind of thinking that got us into this mess.

Relevant:

Kass: Nationalize The Monolines