Let's see when this $700 billion bailout bill passes whether or not we find ourselves in the same situation again next month. There is a lot of assumption associated with this bill. like
- We allow the banks to dump the bad securities, and they will, in turn use the liquidity to reinvigorate lending.-
Why is that true? What if the financial institutions use these funds to cover undisclosed areas of internal liquidity problems and don't use it to lend? Is there anything in the bill that mandates the Banks lending if they get relief? If not, then the $700 billion dollars will evaporate as quickly into the credit market sink hole as the $200 billion that was pumped into the credit market the week AIG was bailed out.
I don't think Congress knows the whole story yet and the result of this $700 billion infusion might be nothing but a rude awakening and more of the same.
Think in terms of this ... for nine years Credit Default Swaps have built, unregulated, to 68 trillion dollars. Every major financial institution is heavily leveraged in this CDS kited float cloud, if this is the root area of credit collapse, all bets are off any successful bailout implementation. I hope Credit Default Swaps are not the root cause if what we are seeing, but time will tell.
Read the Article at HuffingtonPost
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