Tornado Alley (PROG)

[SoxFan]

Ok now the discussion has changed from letting the banks fail to preventing this crisis. So do you agree that letting the big banks fail at this time would have been the absolutely wrong thing to do at that time?


Now let’s focus on this new subject of preventing this crisis. By the time of that article the cat was already out of the bag as sub-primes already were well on the way out and I don't think the crisis could have been prevented. The trash bonds were already bundled and sold and the mortgage payments were tanking by then. It isn't government getting a hold of Wall St but visa-versa Wall St was getting a hold on the government. Wall St made a fortune on shorting those bonds and who lost - the bond holder's weren't the banks remember. The banks made it coming and going. The banks losses were from the actual mortgages they sold directly (contrary to popular opinion the banks were very good at getting down payments and selling descent mortgages) as it was the Countrywide's and all the other non-bank mortgage sellers that came into existence in a big way with deregulation.

While banks were bundling those mortgages and selling them in 2003-2006/7 they were betting against them (especially Goldman). The toxic assets were already there and like the commercial wave that will crest starting the end of this year and through 2011/12 not much can be done other than brace ourselves for the commercial wave of delinquent payments and foreclosures. Oh the banks losses were coming because of the bad economy and foreclosures of their mortgages (which for the most part were not sub-prime).

So the die was cast and maybe the government might have been able to mitigate some if they eliminated the ability to at the minimum stop bettors going up to the window and shorting derivatives/bonds without the assets to back them up. Oh and the Feds could have tightened the overnight rates by increasing capital requirements and reduced the risk taking. That they haven't done anything to date AND have enabled all the banks to borrow at 0% and then buy Treasuries at 0%+ is criminal.

Give me the very same ability to borrow at 0% and then buy treasuries at 1.5% and I'll do it all day.