A Wiki Solution To The Credit Crunch?
December 07, 2008, 09:41 PM
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The conventional wisdom is that our economic woes are due to a credit crunch, and the credit crunch is due to the inability of financial institutions to figure out what mortgage-backed or derived financial instruments are actually worth. "Securitization" (a.k.a., "secretization" in Travis Talk) makes it hard to figure out whether the entity asking you for a loan is bankrupt or not. So, financial institutions are reluctant to lend money to each other.

If this really is the problem, then there is a potential solution. During the credit crunch of 1907, J.P. Morgan had the leaders of all the major corporations bring their books to his mansion, where his men reviewed them and then J.P. told the executives what they must do — you and you merge, you sell your Midwestern rail lines to him, etc.

The books are a lot more complicated these days, but our technology is better too.

What if the government posted all the details of all financial assets online and encouraged citizens to post comments on the assets, such as mortgaged properties.

This is a desperate step since it would involve colossal invasions of privacy. ("The Jones have a $600,000 mortgage! Are you kidding? There's no way their income is $180,000 like they claimed. She drinks and got laid off from her last job. And the house if full of termites. Plus I hear he has cancer. Their son is supposed to be a drug addict so you won't see that money. You won't get paid a dime back on this one.")

But, maybe there is some way to work this idea out so that it would work?