In a stroke this ends this chapter of the subprime crisis. Those assets will now be transferred to the government — the current holders will take whatever loss the Treasury feels is appropriate — and sold back to the market as conditions improve. In the long run this is great for both the housing market and the government — for the housing market because it puts a floor under current falling housing prices and allows America’s positive population growth and net inmigration to slowly raise future prices, and for the government because while it will increase debt in the short term, in the long run it will probably earn the government a profit.
