Capitol Hill Blue Forums Political Issues Finance, the economy & Economics How will the financial crisis develop?

Just to be clear...
I am not entirely sanguine about the mega bail out.
I do think that... even with the problems... it is a better option than "letting the chips fall where they may"

Also, it is reasonable to keep the following in mind. The amount of the bailout is not necessarily buying entirely worthless assets. The assets are illiquid, which is causing a big problem. And there is the further problem that all assets of this type now have to be marked down on bank books to current "fire sale" prices... which may not be accurate in terms of the true value.

If... and I know it is a big if.... if the real-estate slide can be halted at about this level... then those assets will have a value of roughly 70% of the face value... and although that is a big loss, it is still manageable and also less than a total loss.

And then beyond that, there is the over all cost benefit analysis of taking a 30% loss on a big number (questionable real estate loans) vs taking a 50% loss on a tremendously larger number (the entire economy)

Well, we will see how it turns out. I remain convinced that Armageddon will be averted. The ship will be damaged, but remain floating. And that option will be better than allowing the ship to sink in order to prove a point about the culpability of the crew and ship owners/builders.