Originally Posted by Ardy
Originally Posted by kap17
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This is the main problem and this is the reason I don't trust the government to do a good job with this. Banks have already written down a lot of losses on those loans and if they will now sell those to the government at face value when they were originated then I think that is plain wrong.

I agree that would be VERY wrong. And as I understand it, that is not what is now being considered.... ie to take these loans at original face value.

I like what Warren Buffett suggested today, although I'm not sure precisely how it would work...

Let's say a bank has $50 billion in 'toxic trash'... put $2 billion of it on the market, and whatever markdown % it gets from the market, is the same markdown % the gov pays for the remaining $48 billion (which, of course, would not be $48 billion). Some kind of safeguards should be in place so no one 'games' the auction, but it sounds as good or better than anything else... it preserves the market valuation model, but does not create a low-biased market by flooding the market with the 'toxic trash' all at once.

My question is, though, are about the derviatives - arev those being bailed out also, or just the underlying actual mortgages and/or securities? And let's make sure that no one tries to pretend a 'credit swap' is a 'security'! It's not, it's a bet, plain and simple.

I read that the credit swap were so wrong, because it allowed people to take positions on the health of a security without having any stake in it - these things were made up out of nothing, literally! I don't know how it can be true, but apparently there is 500 TRILLION $$ of derivatives, compared to less than 75 Trillion of actual real estate, and 100 trillion in all stocks and bonds of ALL companies - WORLDWIDE. And, the way it was explained, this 500 trillion came into existence in the same way it would be if ANYONE could take out a fire insurance policy on YOUR house... the value of the house could be only 100k, but there could be bets on it that it will not burn down (or, for the shorts, WILL burn down!) to the tune of millions. Hmm. I think I'd be a little nervous living in said house!

How in the world did these 'obligations' come to exist, without appropriate regulation and oversight??

Oh, right, McCain the Deregulator, in charge of the Commerce Committee which, as he puts it
Quote
John McCain, just one week ago
“I understand the economy. I was chairman of the Commerce Committee that oversights every part of our economy”

Never mind that he's wrong, but even to any extent that he's even partly right, isn't he indicting himself??

See it for yourself:
McCain doesn’t know what his own committee does.

Sheesh.

You know, now I'm not so sure if Congress should pass ANY kind of bailout... anything done along those lines, especially rushed, stands a good chance of being worse than the problem it is purporting to solve.

A side benefit would be, with McCain's campaign 'suspended', we wouldn't have to watch all those lie-filled adverts.

Castigat Ridendo Mores
(laughter succeeds where lecturing fails)

"Those who will risk nothing, risk everything"