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Strategies & Market Trends : The Residential Real Estate Crash Index -- Ignore unavailable to you. Want to Upgrade?

To: patron_anejo_por_favor who wrote (109282)	3/12/2008 11:01:00 AM
From: XoFruitCake	Read Replies (3) \| Respond to of 306849

"I don't think we're that much in disagreement except for your categorization of the Fed allowing MBS to be used as collateral is a long term positive" Why is it not positive? Part of the solution to today's problem is transparency and the second part of the problem is earning our way out of the problem. Essentially Fed is injecting 200B to the banking system for those who own this illiquided security. And the loan can be perpetual if the borrowers want to roll the loan forward and Fed is not going to call the loan. And the banks just wait for the profit from the 200B loan to catch up with how much they loss on the MBS itself. Even if you think the MBS is worthless, if Fed let them keep the loan of the next 4-5 years, banks will be able to use the 200B with low interest rate and make back enough money to pay for their loss. I am not sure why anyone want to have a primary dealers go BK (CFC is going to go under if BAC wasn't there). These primary dealers are the biggest banks in the world. The counter party risk for the system is tremendous (think you are bank A has a loan to CFC. CFC go BK, all of a sudden Bank A has to reserve for the loan. Bank A don't have enough capital to cover the reserve. Bank A go BK. and it go on and on. And you multiply the number banks hundred times.)