> There are two cool parts to this solution. One, is that although we're
> not really paying the overage part in full yet, the banks can act like we
> did, because those treasuries can act like money on their books. They can
> use them as first-rank tier one capital. This will help them weather
> the current financial crisis and give them more means to lend.
It's a fine plan, and has the additional merit of requiring the nationalization of the banks. The difference between the face value of mortgages and the rapidly-shrinking underlying value is precisely why the US banking system is kaput. Nationalize housing finance, nationalize the banks!
-- DRR