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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: Jim Fleming who wrote (36281)	7/18/2005 7:12:48 PM
From: bond_bubble	Respond to of 110194

But the important thing is that Banks are not affected if GSEs fail - Bank rundowns happen only if ABS market fails. And only in Bank rundowns can you have liquidity trap!! ie more credit can NOT be created anymore. Also, if GSEs fail - it WILL be definetely be perceived as Govt default (otherwise it would not have enjoyed govt treasury interest rate!!). Again if GSEs were allowed to fail, then fed interest rates will have to go up for treasury for this perception!!!