We all bitch and moan about the housing issues and expect the government to do it’s thing to protect us. But if you look at the private sector and how capital markets work, things tend to figure themselves out.

Take the capital markets. The big boys blew it by writing very profitable in the short term subprime and Alt-A loans that are now a complete mess. While the Feds try to figure this out, look how the markets are repairing themselves.

Hedge funds are getting the bad loans off the big banks books. These loans are selling at a deep discount. And what does the deep discount provide the hedge funds?

It provides the flexibility to re-work the loans so the borrowers may not have to default. The banks were too rigid to work with individual borrowers to fix the issues, but the hedge funds have the mechanism in place to make bad loans workable for borrowers and themselves. Plus by buying at a discount they also have a profit opportunity when all the banks saw was a loss.

Meanwhile Nero fiddles in Washington trying to build a new bureaucracy to save the American taxpayers (and line the pockets of their cronies).

This is why Capitalism (with a capital C) rules.

Dozens of hedge funds, private equity groups and other investors have plunged into the beaten-down mortgage market in recent months, buying tens of thousands of distressed loans and foreclosed properties around the country. They hope to profit from the woes of banks and other investors holding mortgages that have plummeted in value as home values sink and defaults soar. via msnbc.com.

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1. FDIC Will Focus PPIP on Real Estate
2. Bank of America To Modify 630,000 Loans in 2009 To Avoid Foreclosures
3. Why Letting Judges Modify Mortgages Is Bad For All
4. FHA Creating Next Housing Bust? 1 in 8 FHA Loans is Delinquent
5. What is In The Homeowner Affordability and Stability Plan