By Moe Bedard

Wall Street War Brewing Against the Obama Plan, I argued that bond investors were going to start taking the job of protecting their assets seriously even though doing so makes no sense for Main Street. Today’s Financial Times ran an article indicating that these bond investors are so serious that they’re beginning to circle their wagons around the Obama plan as we speak, perhaps considering a lawsuit against the United States challenging the government’s authority to modify loans that were bundled in to mortgage backed securities.

I encourage the battle personally. How else will we unravel the Gordian Knot that is the mortgage backed securities mess, unless, like Alexander, we hack it to pieces. I am in no way trying to indicate what the outcome of this legal fiasco will be, I am saying, however, that this is a necessary step in our efforts to unravel what appears to be an intractable problem.

Perhaps this lawsuit will bring about not only the means to legitimately deal with the ongoing problem but may offer some legal premises to protect ourselves from problems like this in the future. It makes little sense to offer loans on any terms, split the loans in to pieces, and sell them to thousands of different investors in a manner far too complex for even the average securities dealer to be able to clearly articulate.

Bring on the battle!

From The Financial Times:

Bond investors are escalating their lobbying efforts to change federal policies aimed at reducing foreclosures, saying that new measures discriminate against holders of top-rated securities backed by mortgages.

The investors are setting up meetings with senators next week. The next step could be legal action against the US government if the law is passed, on the basis that it could violate the Fifth Amendment.

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