Bailout and Punchout

[midnightranter]

Yeah, long time, no print, but let's get to it. We've had some serious financial problems. The US stock market has dipped below 10,000 and everyone is generally panicking. This comes after the biggest bailout in US history, an historic sum of 750 billion dollars. The details of the plan were noticeably lacking, other than targeting the firms that

Comments

[doitalone]

That's a pretty optimistic view. The problem with the plan is that it basically gives Paulsen the power to buy up these "mass" loans. He doesn't know what it's there - it could be a group of subprime loans that are probably never going to be paid

[zeriel]

From what I understand, the biggest issue is not directly related to the mortgages themselves, but to the insurance that was taken out on them. It seems that the capital insurance market, being mostly unregulated and one-off contract based, was 100% sure until very recently that mortgage asset packages were totally secure.

This is the reason AIG got crushed despite having little to do with mortgages.

This is also the reason I'm very happy I moved my IRA from AIG to a French-managed firm (AXA Equitable) on a hunch of my financial advisors' when I switched jobs last December.

The sad thing is, it really is in some ways a crisis of confidence--the percentage of mortgages that were going to foreclose before things hit the slide was somewhere around 5%. The real crime is how the system got into a state where that small a margin could hurt it this badly.