What is the bailout all about

Everyone seems to have the misconception that the bailout is like giving away free money to private companies, but if you look into perspective, you will see what this bailout is all about.

In my opinion, the bailout must contain these 3 most important points:

1. Enable the banks to lend to each other again
   
   I think is pretty much the reason why we're having the crisis in the first place. All banks are hoarding cash, refusing to lend to anyone because of the lack of trust.
   
   
2. New regulations on how to value illiquid assets.
   
   The current mark-to-market value is a huge joke
   
   This is also the reason why this crisis spawned out. According to the figures from the internet, only 10% of the borrowers are defaulting. If you minus off the sub-prime people, its even lesser. Why on earth should I value something that I've no intention of selling?
   
   The valuing of such assets should be similar to accounts receivables. The amount would be the total amount received if there are no defaults. If there are any defaults, just add the impairment value in. If at some point of time they intend to sell, then shift it to investment assets, which will use the standard mark-to-value method.
   
   
3. Buying the mortgage loans at hold to maturity values
   
   Similar to point 2, if I have no intention of selling, I should be paying for the assets at a slight discount to "book value", which is the value I will get if there are no defaults. The discount will depend on the number of estimated defaults, and the "profit margin".
   
   

What people don't know is that if there are no defaults, basically its not a bailout at all. Its just a shifting of owners for the mortgage loans to someone with more financial clout. In the end, everyone will get back the money.

In fact, the US government can alter the terms of the loan, making the interest more affordable, and stretching the payment cycle so that in essence, they will still get back the whole amount. Just that it will take a little longer.

Politics is a huge waste of time.