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Feb 25, 2009 10:12 pm

Why cant the government just insure the loans in the troubled CDO’s,CMO’s etc?

(or say insure to 70%)

bac,c etc balance sheet become so much stronger instantly.

s and p’s open limit up

government only pays on ACTUAL homeowner defaults.

simple.   problem solved. confidence back

banks pay into insurance fund or something to pay tax payers back.

WTF am I missing?    

Feb 25, 2009 10:15 pm

It’s not necessarily the CDO or CMOs, it’s the CDSs that were written against them. A bank/trader could write unlimited amounts of swaps against the obligations. 

Feb 25, 2009 10:18 pm

I thought CDS were on company debt (or company default). how does a cds relate to a CDO?

Feb 26, 2009 8:47 am

If it was just a homeowner default issue, it wouldn't be this critical of a problem. The issue is the number of leveraged bets that were made on homeowner mortgages. Those are losses that can't be 'insured'.

Anyway, as I understand it, the feds have already backstopped at least two trillion that is most likely been vaporized.

Feb 26, 2009 8:56 am

Oh, and while we're backstopping losses, why doesn't the government 'insure' my General Electric stock. Paid 35, trading at 9 -- if it doesn't come back in the next six months, Uncle Sam should make up the difference to me.

Feb 26, 2009 6:59 pm

It’s sad that most people in our industry don’t even know what they’re talking about…


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