The other thing I don’t understand is what price would you pay for the asset, market? The bank can get market right now. Something above market as gift to the banks?

The only way the idea makes sense is to plow the homes under. You then remove supply (current home) and probably create demand (former homeowner has to live somewhere though many homes are simply sitting empty). If the Fed buys homes at trustee sale (paying no more then market) and plows them under then the former homeowner is freed from debt and the bank gets a bit more because they dont have to worry about transaction fees.

I also don’t believe the problems started in housing. This was a huge credit bubble it lasted for so long it has fundamentally changed the way people perceive debt. People are looking for ways of taking on more and more debt, still to this day. Even though we have people leveraged at the highest level ever measured they are still looking for more credit. They are on a credit downward spiral, they have to borrow from Peter to pay Paul. Housing takes center stage because American’s cultural blind spot to it (we as a people quite simply can’t place a proper value on owning a house) and it was one of the main transmission mechanisms in which the credit bubble manifested itself. But the fact remains it was the excess growth that was based on the credit bubble and housing that has messed up the economy. We have too many people trained in the wrong type of jobs, we have excess capacity that was caused by the credit bubble. We need to recognize credit bubble for what it was and that the solution isn’t trying to reinflate but it is instead trying to create jobs.

A stable housing market is dependent on a stable economy and jobs. Looking to create jobs should be the focus. It isn’t different this time in anything but the size of the problem.