Ooopppsss! 58 Trillion (not billion) Dollar Loan Insurance Market Not Covered By Bailout

[Better Believe It]

Rescue Package May Not Fully Thaw Credit Markets
By Steven Mufson
Washington Post Staff Writer
Friday, October 3, 2008

As hopes rise for congressional passage today of a massive rescue plan for the U.S. financial system, many financial experts are already wondering: What is being left out and what will have to be done next?

The rescue package may be missing measures intended to offset shrinking bank balance sheets, free up capital for non-financial companies squeezed by the credit crisis, or prevent the possible collapse of a $58 trillion unregulated market in loan insurance policies -- known as credit default swaps -- written by a variety of firms, say financial experts.

Most urgently, the short-term lending system remains largely frozen, endangering the ability of everyone from small businesses to universities to General Electric to finance day-to-day operations. The financial rescue package will not fully thaw it.

Peter R. Fisher, a former Treasury undersecretary and former senior New York Federal Reserve official, said that in buying troubled loans, the new agency created by the legislation would attack the credit crisis "indirectly . . . by trying to lighten the load on the balance sheets of the banks, but it is unlikely to do enough to change the propensity of banks to shrink their balance sheets from here to year-end."

That means less lending by banks and tight times for Americans who need to borrow money. Fisher pointed to the generous terms of the deal Warren E. Buffett's Berkshire Hathaway got from General Electric in return for providing GE with $3 billion. Fisher, now a managing director at BlackRock investment firm, said that the deal wasn't so much a tribute to the acumen of Buffett as it was to the desperation of GE, a company with the top credit rating. Buffett is a director of The Washington Post Co.

Please read the entire article at:

http://www.washingtonpost.com/wp-dyn/content/article/2008/10/02/AR2008100203865.html

[Better Believe It]

1. Bailout # 2 I Don't Think We Can Afford This One

[Better Believe It]

2. For The Weekend DU Crew

[Neshanic]

3. "Well ya see, that was for the other crisis, now we have a credit freeze crisis".

"You thought they were the same? Oh you people that don't understand economics. This is different. So where's the cash?"