The Coming Financial Collapse

[downsideup]

That is more or less the heart of the issue in the current crisis, but that insurance doesn't do what many might think.

http://en.wikipedia.org/wiki/Private_Mortgage_Insurance

After the repo and sale, the insurance supposedly makes the bank whole for the difference between cost and the repo.

The problems began when Congress changed the lending standards to require banks to make bad loans. When banks complained, Congress let them package those bad risks into securities so they could pass the risks along. The insurers failed to get the risks right, so they are all basically belly up now, and none of those mortgage backed securities are worth much. Of course, you still have to pay for the insurance on your mortgage...

The insurers, for their part, say that the problem was that the banks misrepresented the risks in packaging the securities, and they are right, too.

The whole mess is Congress' fault, because they let the bankers buy them off with campaign contributions as bribes to pass stupid laws... which the banks were stupid enough to want... thinking they'd leave the other guys as bag holders, and that is what we've got even MORE of now... the worst Congress $$$ can buy... STILL doing exactly what the banks want.

Have a nice weekend, though...