Subprime mess, blame, winners, losers?

Two back to back record breaking months for my office. This thread must be good luck.

 

I thought when this started it deserved its own thread, as it would go on a long time, with profound effects. It has. Bear Stearns bought out for $10 a share, Lehman bankrupt, Merrill Lynch sold to Bank of America for half its value from a year ago. Freddie Mac and Fannie Mae taken over by the govt. Indymac taken over along with 9 other banks so far. I am very sceptical of the saying, "its different this time", but it could be. Much worse than usual downturns. Stay safe out there.

http://www.bloomberg.com/apps/news?pid=20601087&sid=aPTIdpST8HJ0&refer=worldwide

 

how does this affect john q. public? only make it harder to get credit and at a higher rate? anything else? am i wrong to think this is just coming out of the pockets of wall street and not main street?

 

you are right on the credit impact. 2nd, it affects your investment decisions. check the DJIA or S&P 500 since this started in April 2007.

Can affect CD investments, go short or medium term? What will the fed do next, and when? Then how far and how fast.

What is the impact on the dollar? Bad, investors don't like surprises, so could be some outflows from the US, which could short circuit the recent dollar rally.

 

Lehman was hoping for a Gov't bailout but was told "the political climate" is not right at this time. Wonder what that means?

 

over the weekend, paulson said treasury did not have to bail out Lehman; there were two diff. from the bear stearns situation. One, everyone knew lehman had trouble for months, where stearns was a surprise. second, stearns did not have access to liquidity, where the fed opened its discount window to the investment banks after stearns failed.

at some pt. the free market has to work. dead horses have to die. then the markets can try to price RISK correctly again. govt. regulators can set stiffer capital requirements, so when investments go bad, you can sell the asset at market price and not go belly up.

nobody will be buying houses for nothing down for another hundred years or so...

with real wages falling, that's gonna put a big drag on housing for a while, and probably bring prices down some more. as young couples struggle to save down payment, they'll eat out less, and drive cars longer. lot of spin off effects.

 

It means that the bailout of Bear Stearns, Fannie Mae and Freddie Mac generated an anti-bailout backlash. The bailout of Fannie and Freddie could cost taxpayers $25 billion. The idea of bailing out corporations that are in deep trouble because of their horrible decisions is getting harder and harder to sell to a public that will have to foot the bill.

 

****...I jinxed it! :hihi:

 

my understanding is that we dont know how much the takeover cost--maybe $100 bil, maybe we'll make $$$.