Re: Why does Wall St always get bailed out?

On Aug 17, 8:04 pm, darnc...@xxxxxxxxx wrote:
On Aug 17, 4:21 pm, "ruethe...@xxxxxxxxxx" <ruethe...@xxxxxxxxxx>
wrote:

Great article from Fortune magazine:

http://biz.yahoo.com/hftn/070817/081707_sloan_enablers_fortune.html?.v=2

I especially like its conclusion:

The troubling part in the move is that just when everyone tries to
shy away from the subprime packages, Fed allows subprime-asset-backed
bond to be used as collaterals at the discount window for 30 days, and
the borrower has an option to extend the loan. This basically allows
the carry trades to continue forever with risky collaterals at very
low actual value.

If the subprime packages of 100 billion lost 50% of the face value
due to high default rate when banks fail, the tax payer will end up
taking the 50 billion loss for them -- I think the term is "holding
the bags" for them.

It gets even worse. Chuck Schumer is introducing a bill to lift the
cap on Fannie Mae and Freddie Mac's debt portfolio (currently limited
to $1.4 trillion).

http://www.newsday.com/business/ny-bzschu0817-story,0,451942.story

Through various means, the government will end up buying most of the
mortgages the market doesn't want, and the taxpayer will foot the
bill.

This is yet another case of privatizing the profit and socializing the
costs and the risks.

.