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• Thursday, September 18, 2008 02:37 PM

  S&L Bailout x1, 000,000

  Reports are now coming out of the Treasury that the Feds are going to set up a private company to buy up all the bad debts sitting on Wall Street’s books. This is going to be just like the $300 billion bailout of the S&L industry in late 80s when the federal government set up the RTC to close down all the failed S&Ls only at an enormously greater cost. One of the biggest problems with the current crisis is that NOBODY really knows how far the problem spreads.

  Let me repeat that NOBODY knows just how big this thing really is. The derivates market is a mass of fog designed to hide risk.

  Thanks to the now repealed Glass-Steagall Act the S&L crisis of the late 80s was largely contained to the commercial real-estate and Banking sectors. It was expensive but survivable. The era of ‘shared-risk’ means that the current crisis hits the entire financial sector and even crosses numerous borders with markets around the world taking a beating.

  This new ‘government sponsored corporation’ will be on the hook for all those bad debts and their derivatives. And NOBODY knows just how much money they are talking about. $500 billion, $700 billion, $1 trillion. We DO NOT KNOW.

  Meanwhile the twits who made all these bad decisions will ride off into the sunset with their billions in profits and billions in taxpayer money that paid for all their mistakes.

  —thorin01 Read thorin01's other letters
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