Quote:
Originally Posted by pocketkangaroo
In fairness, it is written by a guy who has a lot to gain from a bailout happening.
But if the taxpayers make money, it's only because we paid next to nothing for the distressed assets. If that's the case, the bailout won't really help Wall Street or the economy.
That is the bigger issue here. If you pay more for the bad debt than you should, it helps the banks (which could help the taxpayer), if you don't, it helps the taxpayer. I think that's the trickiest part of this whole thing and the most uncertain element.
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Well of course it's an opinion piece so you can't take it as gospel, but there are some interesting points.
There is a middle ground where the Treasury can buy this paper for alot more than the vulture funds are willing to pay for it, but still make a healthy return in the long run.
The banks know they're going to take losses on this stuff and they're ready for that....but right now they can't sell the paper for practically any price because there is no buyer.
The interesting point for me in that article was about the insurance. How the real problem in all of this was the reliance on the insurance to bail us out if prices plummeted or borrowers defaulted....apparently the insurance companies weren't charging enough to cover their liabilities.
That point and how the mark to market 157 rule required firms to keep raising more capital every time the value of the paper dropped, even if the drop in value was irrational.
Those were things I hadn't read anywhere else.