I'm waiting to see the NEW YORKER cartoon, Uncle Sam leaning into a pedestrian representing the US Taxpayer, a European and maybe even a Japanese. But what has it come to that a number as immense as Seven Hundred Billion dollars is required to "save" our financial system? When you think back the RTC of the 1980's the "cost" was closer to $125 to $150 billion. And we thought that was a lot. The crux of the issue today is liquidity; liquidity needed to support our credit system. This is going to be a worldwide action according to Paulson. And that's why the dollar value is so much greater. Bottomline, I like what Paulson is doing and how he's laid out the plan of attack:
What we're doing is first stabilizing the market," Paulson said. "Once we stabilize the market, we need to ask ourselves how did we get here and how do we avoid getting here again.
So what will we see coming out of this? Who knows. But we will hear that "It's essential" (President Bush), and that it has to happen now (Paulson, Bernanke). There will be an onslaught of media coverage and analysis. If you thought last week was crazy, just wait. Congress will weigh in with their opinions and the financial news shows will opine about it, as well.
Over the next few days, I'll post clips and definitions of some of the arcane verbiage and interesting news stories.
Here are a few definitions:
Mortgage backed securities, it seems the heart of the problem - Wikipedia, SEC, Risk Glossary
Credit Default Swaps - Wikipedia, Investopedia.com, SeekingAlpha.com
Resolution Trust Corporation ("RTC"), a prototype for a new entity to bail the US financial system out of this mess - Wikipedia, TheStreet.com.
DS
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