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Now we are getting a wee bit heated aren't we. At this point in the discussion it is disconcerting that some don't understand the basics. Too often they appear to substitute their own opinion or some hack propaganda for readily available expert analysis.
"If there's illiteracy it's on your part, Sport! If an MB consists of 3% bad paper it must then have 97% good paper within it as well or something is fishy. And you do seem to be changing tunes yet again, the banks have money-they're just not lending it. Likewise, you'd be the last person to learn from that AIG's core business of insurance is doing quite well as it were. So we can hardly expect a trenchant analysis of corporations not letting lust for quick profits get in the way of core business expertise from you now can we?"
The previous post by Sailaway said if the foreclosures are 3% 97% are paying. Nonsense of course because a proportion are in arrears, foreclosure takes time, as the market falls more home owners are underwater, ARMS will reset to higher rates and unemployment likely rise making more fall into arrears and eventually foreclosure.
Further the mortgages were arranged in tranches with the lower grades now revealed to have falsely been given AAA ratings allowing them to be bought and held by institutions only able to buy investment grade securities. They have now been downgraded.
Some of these lower tranches are now worthless. The sale referred to at 25% if you looked actually was 6% cash if all the details of the deal are included.
One of the difficulties is that a lot of the investment banks were leveraged 40x on these things. So even a small loss would wipe out their capital.
The problem with AIG was their involvement in the CDO CDS stuff effectively insuring against losses on this paper. Moreover they were involved as guarantors for others. It really is irrelevant that they had other core profitable business. You lose your capital you lose the business.
As for PBZeer citing salary figures over 1980 -2005 to show the proportion earning over 50,000 increased "so something worked" words fail me. Could someone tell the man what inflation is?
In an earlier post I referred to an analysis of the causes of this mess. There are others. How futile to regress into party political wrangling over causation.
If anyone is actually interested in being independently informed from a range of independent experts rather than just building their posts or relying on Rick as informant/target I recommend nakedcapitalist.com for really up-to-date news and commentary.
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