Does this bailout address the credit default swaps?

[Phoebe Loosinhouse]

Or is that left hanging out there as yet another shoe to drop and another multi-billion bailout?

I want to see an alternative energy source where investment "bankers" and speculators are yoked together in a giant turnstile which powers a huge hydraulic paddlewheel which provides the electrical power to Wall Street.

[dkf]

1. No to swaps...

"The proposal would give the Treasury secretary significant leeway in buying, selling and holding residential or commercial mortgages, as well as "any securities, obligations or other instruments that are based on or related to such mortgages."

http://online.wsj.com/article/SB122191819568460053.html?mod=googlenews_wsj

[Phoebe Loosinhouse]

2. so they have not addressed the totality of the situation. This is a farce.

If they don't address that, then they're STILL all going down anyway. It's just pouring taxpayer dollars down a rathole.

[JackRiddler]

3. That's vague...

CDS could conceivably be covered?

[dkf]

4. CDS are in no way mortgage related.

Credit Default Swap - (CDS)

What does it Mean? A swap designed to transfer the credit exposure of fixed income products between parties.

Investopedia Says... The buyer of a credit swap receives credit protection, whereas the seller of the swap guarantees the credit worthiness of the product. By doing this, the risk of default is transferred from the holder of the fixed income security to the seller of the swap.

For example, the buyer of a credit swap will be entitled to the par value of the bond by the seller of the swap, should the bond default in its coupon payments.

http://www.investopedia.com/terms/c/creditdefaultswap.asp

[Phoebe Loosinhouse]

5. Then I think we are being sold a bill of goods.

I keep noticing how all the coverage keeps trying to blame this on sub-prime mortgages. That is just the whipping boy and tip of the iceberg for what is going on.

The Republican financial guy on Contessa Brewer this afternoon kept saying "We're All guilty." And I kept wanting to shout, "No, you F!@#ing asshole,We're not ALL guilty, YOU'RE to blame!!!!!

[dkf]

6. I found this on AIG. $441 Billion on mortgage related CDS

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=389x4046737

Maybe we had to bailout mortgages in order to prevent us from having to execute our CDS obligations.

[Phoebe Loosinhouse]

8. that's got good info and asking good questions. Another follow the money case.

I'll go and kick that thread because it's very meaty and should be followed more.

[Mnemosyne]

7. They seem to be pushing the fault off onto the poor that were scammed into taking

the crap sub-prime loans.

Aren't the poor and displaced usually always to blame for everything in the US? Like those Katrina survivors? :sarcasm:

[JackRiddler]

10. Again, the language is so vague as to seem to allow it.

"any securities, obligations or other instruments that are based on or related to such mortgages."

Many CDS involve debt related to mortgage instruments. I think the other provisions, basically giving absolute power to the Treasury to pay out $700 billion as it sees fit without challenge from any agency or perhaps even Congress (implied), would allow Paulson to bail out CDS deals if he sees fit.

It's incredible we're even talking about this swindle. $700 billion blank check, no oversight, to take over debts resulting from speculation on debts!

[galileoreloaded]

9. In theory, they are never going to let the mortgages fail, so no ....

swap to collect on. In theory. Will it work? No.

What everybody forgets is the "downturn" won't really hit the tax roles until this year. 2009 city and state budgets are being decimated. Federally, we ain't seen nothing yet. Negative spiral to the bottom is inevitable, so they do this one time transfer of 1.5 or 2 trillion to their buddies, and say hell with it because they know they don't have the receipts to pay the service on our debt as early as next year. Soon as GAO reports cash in hand (which will suck), the rest of the world says "HUH??". China/Russia dump treasury, and load up in something else. Freaking goats or chickens, who knows. By then it is too, too late. Hyperinflation, ala Wiemar Republic, poof, as they spin up the printing press to repudiate debt.

See, its like a Credit Card, as long as you have the income, and the checks are cashing, you can borrow as much as you want, long as you make the payment. We have been borrowing the PAYMENTS lately, and the proof is the logarithmic doubling in total debt, public and private, since 2001. If you can barely make the payments on CC debt at a 10K balance, then when the balance bumps to 20K borrow the payments on another card. Do that......and you get.....this!!!!