Soros Says U.S. Should Adopt Danish Model of Home Financing

Financier George Soros has made something of a splash with an opinion piece in the Wall Street Journal that advocates a complete revamping of the U.S. mortgage market.   It follows a somewhat similar piece Soros wrote for the London-based Financial Times. 

Soros wants to discard the current system and replace it with the one used in Denmark.This  approach uses covered bonds in an arrangement fundamentally different from the rest of Europe.  As Soros explains, in Denmark “[e]very mortgage is instantly converted into a security of the same amount and the two remain interchangeable at all times.  Homeowners can retire mortgages not only by paying them off, but also by buying an equivalent face amount of bonds at market price.”  

The Danish system has a lot of positives, but you won’t really be able to understand it from Soros’ brief summary.  To get a better idea, you’ll need to look at other sources like a primer from Denmark's Nykredit (see link below).

Soros argues that converting our present system to the Danes’ would not be as hard as you might think—in fact, he makes it sound relatively easy.  As part of the process, he envisions liquidating the GSE’s, for which he has no good words.

To make such a radical change in the American system seems utopian, but given the financial earthquakes we’ve experienced this year, does anything seem impossible any more?

Read Soros’ WSJ opinion piece:  “Denmark Offers a Model Mortgage Market”

Read Soros’ FT opinion piece: “A Danish fix for the US mortgage crisis”

Download a PDF of NyKredit’s primer on the Danish mortgage system:  “Danish Covered Bonds”