The price of the rescue plan could be much lower

Sir you opine that the US subprime initiative is “A rescue plan that is worth the price”, December 8. That may be so but unfortunately the plan by keeping all the mortgages linked to the subprime sector of the market and therefore requiring higher rates keeps the price, in this case paid through the implicit interest rate subsidies that lenders have to absorb, unnecessarily high even if no default occurs. You see whether it is through the loss of interest or the loss of capital, a dollar lost is still a dollar lost.

Much better would be an alternative whereby the US government helped these subprime mortgages deserve prime rates. That this would cost the taxpayers additional money is ludicrous; just wait to see how not solving the problems right will cost the taxpayers money by other means, perhaps as an outright recession.

Personally I favour the idea that the US government, just as it sometimes can buy oil for a Strategic Petroleum Reserve, should offer to buy outright 2.000.000 of the houses currently involved with subprime loans; at a price well below the current outstanding mortgages, a one shot capital loss; financed by the current mortgage holder at government rates; and giving the current debtor a option to repurchase his house in a couple of years at a price that would keep the tax-payer from being harmed.