Tuesday, September 23, 2008

Paulson Confirms Feds Will Buy Mortgage Derivatives

Finally, I got an answer to my question, are credit default swaps included under the "mortgage related securities" the government plans to buy from financial institutions? Treasury Chief Hank Paulson confirmed mortgage derivatives fit under the list of products the government will buy back from the private sector in his Senate Banking Committee testimony.

Otherwise the testimony is odd. Christopher Cox assailed the unregulated credit default swaps market and its excesses. It took over an hour for Hank to say those very products could be on the feds shopping list of troubled, even toxic assets.

Also, to rescue failed financial markets, the government plans to use "market based" approaches. What? How will market approaches help those locked up markets? If the market approach worked, couldn't it save itself?

The end result is a bailout of bad assets held by the big money boys. It stinks that unregulated, legalized financial gambles, like credit default swaps, are included! The big boys can’t sell their junk to each other anymore. They don’t trust the system. The taxpayer gets to return order to the frightened rich man’s world. Payday loan rates are only for the poor, not the wealthy.