Can ETFs Help Solve The Toxic Mortgage Problem?

Toxic mortgage backed securities are a major problem-the issue is how to get private investors involved in buying the assets, mostly mortgage-backed securities.

True, we do have a government Public-Private Partnership Investment Program, or PPIP, where the government is lending money to investors to buy these assets.

But these are only open to institutional investors; individuals are shut out.

But there may be other solutions-there has been discussions recently about using Exchange-Traded Funds (ETFs) to buy these assets.

There are several proposals floating about; two in particular-known as "The Stahl Plan" and another being discussed by ETF provider PowerShares.

Rather than going into detail, let me refer you to the following link, where ETF expert Matt Hougan has prepared an excellent synopsis of the problem and how ETFs can be part of the solution.

By the way, earlier this year, Invesco PowerShares did file papers with the SEC to launch two new ETFs:

The Prime Non-Agency RMBS Opportunity Fund

The Alt-A Non-Agency RMBS Opportunity Fund

The problem: these would not buy toxic ETFs, specifically not subprime mortgages. They would only focus on the top tranches of the Prime and Alt-A categories.



Questions? Comments?