D-leverage

Paulson/Bernanke: $700 Billion at 'Hold to Maturity' Pricing

Kudos to those who are constructive and balanced, however unpopular that is on the web. Because while some are beating up on Paulson, Bernake and references to “saving” Wall St, we should also talk about the house flippers, the speculators, the low-doc, no-doc, “anyone with a pulse is approved” mortgage brokers and bankers, and the people who let their credit scores get to the sub-prime level – some of these folks have addresses on Main St. USA. Of course the people of CA, FL, AZ, NV (and even OH & MI) are God-fearing, law abiding pedestrians, but many also have a little “greed” in their vocabulary.
Yes, there needs to be a good whoopin' on the housing asset bubble, and certainly the sellers of assets (institutions and home owners) are not getting "bailed out" without bearing a cost. Bernake is trying to thread a needle with his “hold to maturity pricing” statement – provide price support to get markets flowing again, but recognize that it comes with a tax payer cost. I also took it as some signaling that mark to market accounting in defunct markets is potentially problematic (which was tricky for him to state with Chris Cox sitting next to him). The difference between the market in the state when values were rising and today is that in the rising markets, markets are functioning (albeit somewhat irrationally, because the risk was not being priced right.) Now we have irrationality to a point where we are non-functioning.
Greenspan said -- "history has not been kind to protracted periods of low risk premiums." Smart statement – did he never recognize that low interest rates actually contribute to low risk premiums?
Paulson ought to be recognized as the Rudy Giuliani of this crisis.