NJ5 said:
Yeah. The longer we allow the current practices go on, the bigger the hole will be (and taxpayers will have to bear an enormous amount of interest on the debt governments take in the process). For all the talk about regulating banks, check out this recent article, which IMO amounts to new banking fraud happening right under everyone's nose: http://www.bloomberg.com/apps/news?pid=20601087&sid=aeTzfvEedKpQ Basically banks are starting to repackage toxic mortgage debt into AAA rated financial products. AAA is the highest rating. Banks, ratings agencies, pension funds which buy those financial products are all complicit in continuing to hide bad debt under the carpet (when they don't shift it to the government).
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The unfortunate thing is that, had the banks been allowed to fail, this debt could have legitimately been converted into AAA financial products ...
If the banks had failed it is likely that this debt would have been auctioned off at 5% to 10% of its current book value and many business men would have taken this debt, unwound it (as much as they could), offered loan modifications to home owners (potentially lowering the principle and the interest rate), and then repackaged them according to their risk level and acutioned them off for 25% to 50% of their current value.
