The President's Speech:

1. If it is so obvious that the mortgage-backed securities are undervalued because of the market stability that the taxpayers are going to make money in the end, why aren't private investors steppeing forward to take advantage of the situation? This is what Warren Buffett is doing with Goldman, with reports being that Buffett is getting a great deal because he is remaining calm.

And again, this just raises the vexing problem of valuation mechanisms--which to the best of my knowledge still remains unsolved.

Nor does it seem obvious to me that it is necessary to buy up all of the sour loans, but just enough to get the markets going again, which surely must be less than all.

2. President Bush implied that the real problem for the larger economy is in the short-term commercial paper market--or at least that's what I understood to be the thesis. But that the commercial paper market was sagging because of overhang from the sour mortgage market. But if that is the case, how much would it cost for the government to insure commercial paper transactions. Wouldn't this be less expensive and disruptive than taking over the mortgage market? Was he implying that there was some other way in which the mortgage market is bleeding over into the larger economy? I'm not being tendentious here--I'm genuinely asking why isn't this a viable option?

3. Why isn't something like chapter 11 bankruptcy not a viable solution to this problem? The whole purpose of bankruptcy is to clean up debt on the balance sheet and get a fresh start for the corporation. As the quick infusion of capital into Morgan Stanley and Goldman Sachs shows, there are investors out there ready to snatch up bargains or to lend money. True, it would probably hurt the management, creditors, and shareholders more than this scheme, but I don't see why it makes more sense to hurt taxpayers instead. This presumably would also open up the opportunity for fraudulent conveyance actions to recover some of the big bonuses paid out to executives of these firms in recent years.