For a short time, then they have to pay the money back.
The problem is with your friends who after holding the worthless paper and trading it for cash, decide to deploy that cash in future worthless paper.
Banks are going to borrow from the discount window to buy more CMOs? That's funny.
Oh I remember you, one of those that thinks they know it all but understand very little.
The CDO/CP bailout was just that, a bailout by the Fed. If you disagree then you can take your bleating argument to every hedge fund and trader on Wall St. because they know it was a bailout. The financial press has turned out abundant commentary to the fact that this was a bailout.
The banks that were involved may pay it back but not soon. The private equity groups caught holding bad paper will not be paying anything back because their worthless paper was put up as collateral, they were bailed out.
When you trade or invest, and you are allowed to turn your loss into federal reserve notes, you are going to exchange those notes for another trade or investment eventually, because your business is trading and investing.
The warning is not to trade or invest again in more speculative deals. How to stop that from happening? There is no ‘how’ other than to restrict the lending practices that preceded the bailout. And that is precisely what is happening with the closing of lending shops all across the spectrum.
But that won’t stop yet another set of ‘innovative’ risky financial practices from popping up again in the future, say in a few years. The cycle repeats. Wall St. and the Fed are joined at the hip.
These comments are for those reading and not for you. You have demonstrated in the past you value the chip on your shoulder more than rational discourse.