Thursday, September 18, 2008
Hedge Fund America
The stock market jumped at the thought of the US taxpayer relieving the upside down investment banks of their crappy mortgage derivatives. Only problem, we, U.S. becomes the biggest hedge fund in the world once we assume all of those bonds. This could work out well if the assets are stabilized and sold later on at a reasonable price, AND IF commercial banks start loaning money again.
Theoretically, the AIG deal is already a good trade when looking at it after today's jump.
The risk of this Resolution Trust Corporation type solution is still unknown until we get some details. Bernanke camping out on Capitol Hill tonight.
Expect failure, higher costs, and endless "bailouts" and stimulus.