You have to be prepared to reduce principal, to actually mark down the face value of the loans, because if people can only afford to pay 80¢ on the dollar, there is no point in pursuing them for two decades trying to get 100¢ back. It just won't work. You can reduce interest rates, but their stock and debt is really the critical issue.
I see the same sort of learning by doing process happening right now on a global basis with respect to the financial crisis. Look at where Mr. Paulson came from in the course of one month. In September he went from complete belief that you should allow institutions to fail to stepping up and recapitalizing the banks. He had a total reversal of attitude in the space of one month.
The same sort of thing, the learning by doing, is happening over the course of this year. What I see the U.S. government doing, frankly, is almost experimenting. They try something; if it works, they go on. If it doesn't work, they try something else.
Clearly, there are going to be responses. Things we can't anticipate perfectly are going to happen. For example, if the asset-stripping program that Secretary Geithner has announced goes forward with $1 of private capital for every $5 of public capital, it's an extraordinary ratio. Almost all the risk is still being taken by the private sector, but the private capital is needed to set the price of the distressed assets in the markets.
Negative things are going to follow that. For example, suddenly banks will have to mark up all those assets. They may actually need more capital, so you may see some major money being sent to banks in the United States, requiring even further state capital injections, which may have consequences down the road. That's the kind of thing I was talking about.
I think we're on the right path. I think governments learn by doing, starting with the equity injections, which is something the academics tell us is almost always the bottom line in a financial crisis. Governments step up and recapitalize banks. That's been done. We're now looking at taking the bad assets off the banks' balance sheets in the United States, but we really don't know what the end state is. We think we know the direction the train is moving, but we could well be sideswiped by--