The basic problem is that the financial sector faces systemic risk in a way that no other industry does: By its nature, it is a house of cards that can collapse at a moment’s notice.”
I think most of the public understands this very well. The difficulty is rewarding those who profited enormously by securitizing debt and derivatives off that debt should be bailed out for creating the very systemic risk which is threatening to swallow the industry. This securitized debt due to its lack of homogeneity is impossible to value and that problem becomes especially acute when credit begins to unwind. NOBODY WANTS TO TOUCH IT BECAUSE THEY DON’T KNOW HOW TO VALUE IT. The boneheads who generated these investment vehicles and their derivatives have spread this contagion throughout the retail and investment banking worlds and now look to Uncle for a handout stave off reckoning.
Bears repeating. I'm glad you shouted, too.
Sorry, I have to disagree. The public doesn't understand how all this relates to their own lives -- as the first reply on this thread said "I can't get a loan to keep my own small business going because of all this..." And for this, I have to say that I think Bush and Paulson have done a TERRIBLE job in explaining all of the ramifications. Maybe they don't want to cause a panic, but in being so inarticulate and closed-mouthed, they are keeping the public essentially in the dark about the possible outcome.
NOBODY WANTS TO TOUCH IT BECAUSE THEY DON’T KNOW HOW TO VALUE IT. The boneheads who generated these investment vehicles and their derivatives have spread this contagion throughout the retail and investment banking worlds and now look to Uncle for a handout stave off reckoning.
I agree but I also disagree. The regulators need to get rid of or at least modify the "mark to market" rule because that is pulling all asset values to the cellar -- the lowest common denomiator -- and that is probably responsible for 50% of the problems we are facing at the moment. Get rid of mark to market: your house's value shouldn't be assumed to be equivalent to the foreclosed property just around the corner that's being put on the market at a give-away price -- but that's what is happening in the financial world.
I know these are contentious issues, but I do believe a rational rescue can be constructed (and modified as needed). Unfortunately, this is another example when lousy communications skills in this Administration are contributing to the problems this country faces. Where's the Next Ronald Reagan when we need him?