Looks as though we aren’t going to escape the Nelson style ad hoc gimmicks from the Vaucluse Silver Tail either.

Seriously, there’s an interesting question as to what happens to foreign institutions holding American subprime debt, given the US bailout. There’s an afrticle at the New York Times on the topic.

Frankly, if I were the Australian government, and was feeling Machiavellian, I’d suggest that any Australian institution holding anything that would qualify for the US bailout, to sell it to an American-domiciled institution, who would then be able to onsell it to the US treasury….

Late yesterday he expanded on his suggestion saying that earlier this year the Government had introduced legislation that would allow the Office of Financial Management to buy Australian mortgages.

The article, as a whole, is not very clear, but the idea does seem to be in the context of buying Australian mortgages, not American ones (or derivatives thereof).

Now, unless there are recent developments that we’ve not heard about yet, there simply isn’t the domestic equivalent of the subprime crisis here. The last S&P report on mortgage arrears suggests while they have risen slightly, they’re still only 1.5% of all mortgages. Australian subprime mortgages (which are a tiny fraction of the Australian market) have also had an increased default rate, but it’s again not a huge increase. News reports in the USA have the number around 10% of all mortgages there.

So – unless Turnbull was simply making talking out of his backside, always a possibility of course – he has to be talking about buying healthy mortgages off banks so that they can use their capital to offer new loans.