Raise the caps at Fannie and Freddie to unlimited, print a ton of money, lend it to Fannie and Freddie, who will be able to buy all CDO’s on the planet, have them repackage the products into REMICs (sounds better than CDO) and then resell them with a guarantee of the US government. That would solve it wouldn’t it?

OF COURSE I AM JOKING! Obviously, the effects of such a “plan” would be as devastating as the problem itself. But I have not yet heard any credible plans either. So I thought I would throw together a bunch of the stupid ideas that have been tossed around and point out the absurdity of the path we are on. As I see it, the path being presented most frequently revolves around the government throwing a ton of cheap money at the problem. A problem created by cheap and easy money being thrown around by the government and lenders. BRILLIANT!!

A month ago, I wrote a post called “Subprime Solutions” where I implored the government to set up a forum to develop ideas to address this crisis. Since then, the problems have spiraled out of control and as far as I can tell, there hasn’t been much brainstorming going on. In the “Subprime Solutions” post, I offered up the idea of breaking apart all the CDOs to identify the healthy components from the unhealthy ones. Gillian Tett of the Financial Times recently made a similar suggestion. Since I consider Gillian to be a superior financial journalist, I was happy to see her thought-provoking article. But until there is a coordinated effort to evaluate market-based solutions and not just read about them in papers and blogs, I suspect we are doomed to rely on a government bailout.