The government creates these 2 entities "for the public good." I am curious, if this is true then why did these entities have to spend hundreds of millions of dollars to help certain politicians get elected. Oh never mind it's just millions with an M, way bigger questions to address below . . .
Their current combined capitalization is around $6 Billion (notice the B)
Congress estimates their combined losses will be in the $25 Billion range (anyone willing to bet on that?) My best guess, take that number put at least 1, probably 2 zeros behind it and you will be closer – read as $250 Billion - $2.5 Trillion (notice the T)
They have over $55 Billion in preferred shares and subordinated debt, who would ever lend or invest in them at this point? Warren Buffet (of whom I have always been a HUGE fan) says they are toast, game over, they are done.
Combined they back over $5.2 Trillion (there’s that T again) in mortgage securities.
I just read where there are $62 Trillion in credit default swaps written against their debt. But no one knows who owns it, no one knows the terms, and no one knows how it’s insured (ha-ha – insurance on investments or in financial markets – what are you stoned?)
So in summary:
$6 Billion in combined capitalization
No one with an ounce of sense to inject any more money
Losses to be realized of somewhere between $25B (if you believe your politicians) and $2.5 Trillion if you believe we have just started to see the tip of this iceberg.
$55 Billion in preferred shares and subordinated debt held extensively by banks who would fail if this was wiped out thereby further increasing the already unbearable burdens on the FDIC
$62 Trillion in CDS written against their combined debt.
Does anyone else’s head hurt?
How did we get here?
How many other situations public, private or in between exist like this?
After people stop paying on their homes, how quickly do student loans, credit cards, boats, cars, etc stop being important enough to continue making payments on?
Who is next?
For how long will the public be willing to allow others to provide unlimited band aids at our expense?
What would happen if we could waive a magic wand and simply say “what’s done is done, your government will not spend another dime on this matter, nor will we support or reimburse anyone who has been impacted by it. If you are over 18 years of age, tough figure it out. We have already saddled our future generations with enough burdens.”
Yeah of course there would be riots and anarchy and millions of people left hurting. But it would be over, the pain would be realized and we could lick our wounds and begin the healing process. We would learn how to think, how to work and how to be responsible for ourselves. We would probably demand an educational system that taught us more about understanding our finances and our financial decisions. We would take better care of ourselves if we knew that we had to pay the bills ourselves when our poor choices led to health care expenses. We would pay more attention to a lot of things. Would that really be so awful – a nation full of people who struggled, and worked hard, thought harder and fought for a new and better way? Oh wait, wasn’t there once a nation something like that, I don’t know maybe back around 1776?
