Right "on the money", pardon the pun. The MBS/CDO, GSEs and CDS conditions were in place Bear Stearns was the trial run of short selling pressure and "run on the bank" by investment counterparties. Schumer's deliberate exposure of IndyMac (which could have been calmly offloaded by FDIC to other financial institutions the way Countrywide was to BofA and many smaller REITs were) was the prelude to generating consumer panic and test of consumers' "run on the bank". Lehman's and AIG failures after the attacks in early September on them along with Morgan Stanley, Goldman Sachs and others, proved to be the nail in the coffin and resulted in complete cash crunch and credit freeze and sky high loan rates spreads (LIBOR, TED).
Anatomy of Morgan Stanley Panic
Defusing the Credit-Default Swap Bomb
Lehman's Chaotic Bankruptcy Filing Destroyed Billions in Value
Consider just this fact:
$11T-$14T in total mortgage market - thats subprime (less than $1.5T) plus Alt-A plus prime, entire market. Some estimates put the total securitized market (MBS / CDO) at $7T-$8T. There was estimated $60+T of "insurance" (CDS) on it. That's not a house insurance", that's a fuse underneath it that was waiting to be lit.
Please explain. Do you mean mortgage insurance? What are CDS?