So one of the questions that needs to be answered is how much were the problematic financial instruments purchased for. Until we have some rough idea of that, it seems we are guessing as to how much money is needed.
The next question is what is the total amount of the mortgages upon which the bad paper is based? In other words are we talking financial instruments that were purchased for $5 trillion that are based on mortgages that total $1 trillion. Again, some rough idea of the disparity between the purchase amount of the bad paper and the mortgages upon which they are based needs to be known.
Next, what pecentage of the mortages are actually in default. Is it 10% or 20% or some higher figure. From what I've read, it appears that a large portion of the mortgages upon which the bad paper is based are not in default. If that is the case, then the problem is purely one involving the aftermarket in mortgages
Given the lack of basic information on these issues, I am beginning to suspect that something like a ponzi-scheme was occurring in the aftermarket on mortgages. In other words, what happened was that a mortgage for $10 was sliced and diced and then sold in individual parts for a total amount well north of $10.
I hope I am wrong but I suspect the reason answers are not forthcoming on these basic questions is that Goldman Sachs was a central player in the aftermarket on mortgages on Goldman Sachs is now in charge of the Treasury Department.
vbmoneyspender wrote: “So one of the questions that needs to be answered is how much were the problematic financial instruments purchased for.”
The mortgages went into the MBS at par. The problem is what are they worth now because so many are in default, along with the fall in value of the collateral.
I doubt there was fraud related to selling the same mortgage 5 times over.
Where the fraud was is more related to the rating agencies: rating these MBS at AAA given the default rates we have seen suggests “enron” accounting standards were being used by the rating agencies.