To do that, you have to force participants in the mortgage process to open up their books, and none of the proposals announced by Paulson on Monday do that.

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If any further action is needed, it's possible the Federal Reserve could open its discount window to the mortgage buyers.

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Some are already avoiding doing business with US clients, so much so that US citizens living in Switzerland find it extremely difficult to open a bank account or get a mortgage.

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The initiative, part of the administration's Home Affordable Modification Program, is open to homeowners who have missed their mortgage payments or face imminent hardship and who owe more than their homes are worth.

WSJ: Data Show Fannie, Freddie Savings From Debt Forgiveness

When the Fed pours money into the system with the purchase of mortgage-backed securities, combined with guidance from the Federal Open Market Committee that the federal funds rate will remain near zero at least through mid-2015, it depresses yields on debt instruments.

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It is more likely that they popped open champagne bottles and celebrated, for now they had achieved government control over the gigantic home mortgage business.

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When the Federal Reserve Open Market Committee met in June, more bond purchases to push down long-term Treasury and mortgage rates were already on the table.

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Buying mortgage origination and servicing businesses gives investment banks a chance to beef up their mortgage securitization businesses with a source of new loans to package without having to buy them on the open market.

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Testifying before the House Financial Services Committee, Geithner said the administration plans to open a public comment period next month for stakeholders to weigh in on what to do with the government-controlled mortgage buyers Fannie Mae and Freddie Mac.

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