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To: Lizzie Tudor who wrote (78064)	9/18/2008 3:32:26 PM
From: inaflash	Respond to of 213176

$6 trillion mortgage pool with a 10% interest rate. Do you have a source for the 10% rate, I think its too high. I thought so too, but this may be one way on how that number was reached: Start with $10T CDO swaps at 6% ($600B annual interest) bought at discount of $0.60/dollar. Hence on paper, it's now a %6T pool receiving $600B annual interest (yeah, right), and that's 10%. :-) The $0.60/dollar may be optimistic: Simultaneously, Thain entered a deal to sell collateralised debt obligations with a face value of $30.6 billion to US private equity firm Lone Star Funds for $6.7 billion. With the sale, Merrill reduced the aggregate CDO exposure on its books to $8.8 billion. The CDOs were valued on a face value basis at 22 cents for every dollar. Merrill financed Lone Star to cover around 75% of the purchase price so Lone Star’s equity investment translates to just 5 cents for every dollar of CDOs. Again, a difficult decision and one which few of the other affected subprime banks had taken. But one which enabled Thain to tell analysts on the Monday call: "we have been consistently reducing the risky assets on our balance sheet". financeasia.com

To: Lizzie Tudor who wrote (78064)	9/18/2008 5:23:10 PM
From: Keith Feral	Respond to of 213176

The Treasury was charging outrageous spreads to Libor for the loans to FNM, FRE, and AIG. They are getting paid an 8% premium to Libor, based on the dire credit situations of those companies. The unintended consequence of those policies may reflect part of the underlying surge in CDS rates for all the banks to lend to each other right now. Paulson may not have been the puppetmaster, but the interbank rates are following his financial architecture. I hope this RTC brings the confidence back into the system.