[Dawn531]

Instead, companies with bad loans would buy insurance from the feds and the feds would turn around and sell the bad loans they end up getting stuck with

Somebody explain how this works. If the bank is broke, how do they buy the "insurance?" And who would they sell the bad loans to?

[BGHater]

The ‘Banks’ could look for investments from private entities that have money. Warren Buffet just put up $5bil. China has tons of cash as well as the ME.

Credit Unions tend to do better in circumstances right now. They have options for investment as well.

The banks could keep the loans, either to write them off or hold onto long term to sell them later.