I've been trying to make some sense out of the mortgage securities that the government is going to be buying up from banks. That's the reason for the bailout these mortgage securities. The idea is down the road these mortgage securities that the government buys from banks will increase in value. The government will then sell them back to the banks.
So this is what my question/questions or better put my concerns are.
Let's suppose the housing market recovers. That will probably be several years down the road. At what point in time and who decides when to start selling the mortgage securities back to the banks. Is this something that is going to be figured out now that the bailout has passed? Or is this going to happen later down the line?
The next thing is this. The government starts selling the mortgage securities back to banks. Now I'm a bank. Let's say I decided to buy some of these mortgage securities from the government. Does the fact that I've bought these mortgage securities make it more or less likely that I will be lending money to ordinary people? What I'm wondering is what does all of these mortgage securities suddenly appearing in the market due to the normal lending patterns of banks. Does this mean they lend less to ordinary people to buy more of these mortgage securities? Then don't we end up right back where we started.