So if the problem is liquidity, why do we have to buy the bad debt?

[still_one]

Why don't we just provide the liquidity?

screw buying worthless junk that will most likely be charged at a higher value than it is worth to us

Doesn't this remind you of the con of the IWR?

[sandnsea]

1. Because the bank ratings would still be bad

As long as these banks hold this bad debt, they're bad risks. And we shouldn't give any bank with a bad rating government money. So we're going to buy the bad debt to restore the banks' financial standing so that they can begin issuing credit again. In addition, having these bad debts off their balance sheets helps them to refocus what profits they do have, into better loans.

[still_one]

4. Then those banks should go under, and those other banks which are viable

should take over the depositers accounts

Isn't that what happened with WAMU and Wakovia?

[sandnsea]

7. With help from the feds

None of these takeovers would have occurred without a variety of assurances and rule changes from the government, and some of that is goddamn scary too. These bigger banks have done about as much taking over as they can.

[still_one]

8. I hear you, but that might be better than buying worthless junk /nt

[sandnsea]

11. No. Banks failing is not better. It's that simple. n/t

[girl gone mad]

5. That presumes that 700BB is enough to cover the bad debts..

which I don't think it is.

It also presumes that the underlying problem is the debt itself. I think a good case can be made that the underlying issue is a total loss of public trust. The banks lied about the value of the securities they were selling, they overrated tons of derivatives and no one wants to do business with them now. They were extremely leveraged, so until we get some forensic accounting taking place, we can't have a very good idea of how deep the abyss is. Giving them more piles of money may work in the very short term, but in the long run, it won't do any more good than giving Enron piles of money would have.

[Two Americas]

10. right

"Trust" must be connected to "trustworthy."

[soothsayer]

2. the fed provides liquidity every day

so, yeah...what's the beef?

[still_one]

6. That is what I want to know. The more I think about it, I don't want worthless junk /nt

[sandnsea]

9. which has been going to service bad debt

As long as the banks have to deal with the losses from these bad mortgages and securities, there won't be any money to lend to what businesses are left in this country.

[girl gone mad]

13. We can recapitalize. We don't need to bail out.

On the one hand you admit this is debt that we're buying. On the other you tell us it's a good deal.

I'd like to see the business model that let's us profit from paying off gambling debts. I'll move to Vegas, set up shop and get rich.

[Jade Fox]

3. That's what I've been thinking!! nt

[tama]

12. Tried that

for at least a year now. Fed and other Central banks pumping insane and ever increasing amounts of liquidity to money markets. Not working.

Now Fed and helicopter - sorry B52 - Ben is creating money out of thin air without any collateral, and even that does not seem to help. Banks or the "financial sector" won't trust each other without infusion from real economy (tax payer money) and any infusion of blood for the vampires will be of course only of limited duration. Parasites can't feed on each other, they need real hosts to suck the juice from.

Of course none of this will make any sense, if one does not understand that the financial capitalist "bankster" class is really nothing but a non-productive parasite make-believe class of the working class that produces the food, clothes and shelter of real economy. Who fucking REALLY needs them?