As I understand it, all of the CDO nonsense is based on making money on someone else’s debt—buying and selling it and taking a fee for arranging the meeting.

How about if we declare a “Jubilee?” Everyone gets all of their collateralized loans, their mortgages, auto loans, etc., written off. Folks get clear title to houses, cars, boats, trailers, etc. out right.

Seems to me that this then frees up a ton of bucks that everyday consumers today are using to pay off those loans. They can take all of this newly available cash to start investing in more traditional ways or in some new wonderful scheme that the investment whiz kids dream up. Government gets a big income boost because the ability to reduce one’s taxes based on mortgage interest deductions in Schedule A goes away. A lot of short term work at deed registries and the like across the country is created as liens are cleared and titles to property get released.
If a few investment banking “pimps” get stiffed, so be it—seems like they ought to reap some “rewards” for the risks that they transferred to others.