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View Diary: How much is $700 billion? (33 comments)

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  •  Collection of derivatives, not mortgages (1+ / 0-)
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    kurt

    One reason no one knows what the heck all that paper is worth is that it isn't the mortgages themselves. It's pools of mortgages that have been sliced and diced, and priced by computer simulations that no one tested in the real world. Now it's pretty clear that the computer simulations were AFU. It's hard enough to figure out what percentage of a given pool of mortgages will default, which might enable you to put a discounted price on the pool. But the slicing-and-dicing adds another layer (or ten) of uncertainty and speculation. They're clearly worth more than zero -- some of us are, foolishly perhaps, still making mortgage payments even on subprime or alt-As -- but no one has any way to calculate how much more.

    The same is true, or soon will be, of sliced-and-diced pools of student loans, car loans, credit card debt, and probably a lot more.

    •  Yes, you are right... (1+ / 0-)
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      kurt

      and the people who know best the details of these securities will sell the very worst to US.  

      Paulson's proposal, and both Dem proposals still say the first priority is saving companies, and the second is protecting the taxpayer (and thus, the American Dollar)

      We need a tough negotiator here, certainly not Paulson. Actually, we could bid out the contract, and get someone to work on a couple of basis points of the ultimate profit.

      And a good trader could make a fortune.

      •  If that's true, where's the private sector? (1+ / 0-)
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        veratis

        Why aren't they rushing in? Seems like there should be some bottom-fisher doing exactly what you're proposing, just like the third-rate debt collector outfits that buy up bundles of old debts at pennies on the dollar, and then try to collect double what they paid.

        The fact that no one is lining up to do this signals to me that anyone who knows the details knows how worthless the paper is.

        •  Most people are so overextended... (0+ / 0-)

          that all it will take is a trigger, a cascading loss of jobs, payments on all debts, and further failure of companies and loss of jobs.

          This is a house of cards.  And what no one is saying, not McCain, not Obama, not Paulson...is the change will not come with this 700B.  It will only keep the system alive for a while longer.

          Perhaps the only cure is a depression, a decline in productivity, wealth....and most importantly...expectatons.

          And old car, an old house, a smaller TV will be O.K. And some people work and other's don't

          This is major, and our political system isn't capable of other than trying to get elected.

          Sadly, our man Obama, has no more taste, or concept, or suicidal instincts to do this than does the opposition.

          I hate when I'm so lucid.

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