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Originally Posted by Snake Doctor
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.
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Finding a middle ground is tough though. The more we pay for it, the more the public will be outraged by the price tag. And valuing these distressed assets is real difficult.
I think one problem is that we don't really know the future of housing or credit. We saw huge gains in housing because it was so easy to get credit. There were a lot more people than their should have been out there buying. If strict regulations go into place, or banks wise up and cut back on stupid loans, won't that ultimately hurt the resell value of these assets? I just think it's overly optimistic to assume all these assets are going to shoot up in 5-10 years when we may have seen the last of this huge growth in housing.
But of course the biggest issue surrounding the whole thing is what we could have done with this money in the meantime. We could have invested it into alternative fuels and had a booming energy market in 10 years that dominates the world. We could have improved schools, given more school grants/scholarships and created a smart, innovative generation (like what Asia is doing). We could have improved infrastructure in this country which would ultimately provide solid jobs to people and improve the economy long term.
We could have provided health care for those who can't afford it or just can't get it and allowed people to be not only healthier, but give them more income to spend in the economy.
No matter if we make money on this or not, it won't benefit anything in this country. Our growth and prosperity will stagnate because of this. And a few crooked bankers will end up jumping out with their golden parachutes.