The values of existing loans are tanking. That’s the discipline of the free market. So let’s set up a mechanism whereby homeowners can purchase their existing mortage at market value.

Let mortgage holders offer the devalued mortgages that they want to unload on a government run ebay-like mechanism. But, before a loan gets sold, the homeowner gets to buy it by matching the high bid, and we set up an institution to loan the homeowner the necessary funds to purchase his/her existing mortgage at market at reasonbly favorable terms.

Note that he doesn’t have to have dreamed it up himself. That’s what the help are for. Note, too, that the standard types of schemes are quite well-known, one only needs to find the one (or ones in this case, where several are nested and otherwise interlocked to provide different aspects of the mechanism) that fits the situation and tools one has on hand.

What we’re victims of here could be called The Longest Con, after the terminology whereby a Big Con, Long Con, Big Store game, or some such, is a scam run through a special-purpose phony enterprise, like the fake gambling house used in The Sting to hook the Shaw character. Recall too how executing that scam involved a lot of subsidiary games, some of which were run on participants in the game in order to get them to do certain things naturally.

A critical element of The Longest Con: Reloading Scams. Think of it as a kind of waterboarding.

It is a scam, as the whole thing has been from the decision to use mortgages as the vehicle for robbing the middle class. That bankruptcy bill is another one of many tells. The quiet creation of a structure that got most of the risk off the balance sheets of the prime beneficiaries is another; one of the most insulting aspects of Paulson’s proposal is that many of the ultimate net recipients of those bailout funds have already made out like fat rats off the fee-generating side of the lending process.

“The possibility of businesses shutting down for want of funding, said Paul Schott Stevens, the Investment Company Institute president, was bracing for the government. He told Washington officials of the worry conveyed by his talks with executives this past week at dozens of fund firms.”

So why don’t these firms have the cash to to address their financing needs? (strictly rhetorical question).