This is a Cato special podcast as part of President Bush's plan for the feds to come to the aid of home loan debtors who may face foreclosure.

Treasury Secretary Hank Paulson says those lawsuits from investors

shouldn't delay the Bush plan.

William Poole, President of the Federal Reserve Bank of St Louis, addressed those concerns

at a Cato Policy Forum last week.

This is a segment of that event held at November 30th.

Warren Coates, The roughest period for the subprime market will

apparently be this next year as the largest number of them get rebased to higher interest rates.

As you noted in your talk, it's desirable both for borrowers and lenders to minimize unnecessary costs or losses as a result

of mistaken judgments taken earlier, meaning renegotiating mortgages sometimes.

In your judgment are the legal regulatory infrastructure that's applicable

appropriate for sort of that kind of an outcome,

an outcome that allows, provides incentives for renegotiations that minimize unnecessary

costs or are there some adjustments in that framework that do you think would be

helpful to that process?

And I'm not far from being... think would be helpful to that process?

And I'm not far from being an expert on this.

I'm sure there are people in this room

will know more about this than I do.

The individual subprime mortgages, most of them have been packaged into securities of some form or another.

And I guess there's some sort of trust arrangements are set up where the trustee is responsible for taking the payments that come in on mortgages and

feeding them into the investors and there's various tranches and so forth.

...