bail-out

[entropydevice]

So, does anyone understand how this bail-out package is supposed to be working? Or generally what the cause of this economic mess is? I understand giving out inappropriate loans like candy, I understand selling shares of that debt. I understand big insurers suddenly getting nailed to the wall, but what exactly is the plan here? Is the

Comments

[djinnj]

I'm pretty clueless, but this is an explanation for "how", and this basically agrees with your "mugged" analogy. Which is apparently why people are starting to say "No" to Paulson's "must do this NOW" cries.

it's all part of the plan...

[anonymous]

So a while back, some genius invented the mortgage backed security, which allowed people to invest in "the housing market" without going out and making an actual loan to someone. Unfortunately, these securities completely insulated the people making the loans from any risk of foreclosure, so a bunch of bad lenders started giving money away to people who couldn't afford to pay them back and then selling the debt to suckers in the financial industry (after taking a little cut for their troubles). These suckers were easy to find, because the risk profile of these securities had been grossly misestimated by the rating agencies. To make matters worse, the big financial firms used these supposedly rock solid investments as collateral to borrow against (at very high leverage rates), and they all owe a lot of money

Re: it's all part of the plan...

[flurious]

and if you need basically exactly what he said in comic format: http://www.businesspundit.com/sub-prime/