The US Treasury could allocate a fraction of what is being "committed" to the solvency of the GSEs to initiatives directly designed to assist distressed markets and homeowners. Sustainable foreclosure prevention programs like the “new and improved” FHA Hope for Homeowners program, which forgives principal but allows the government to share in future appreciation of the home’s value, could be widespread with Treasury funding for principal reductions. Some of the unspent Treasury dollars could be used to allow the GSEs to sell some of their riskiest or best assets (depending on risk management philosophy) and take the losses. I feel the current approach of using Treasury funding to increase GSE portfolios, allowing them to take on more risk, and delay dealing with the problem is far more dangerous and costly in the long run.
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