Smarty_Pants

The Unwinding of the Moral Hazard Trade

You forgot to mention that WaMu bond holders were sacrificed in order to scare Congress into passing the bailout bill.

Even WaMu's corporate officers were taken by surprise at the FDIC shutdown and immediate fire-sale of assets. I suspect that the bank could have survived until the bailout was passed and continued operations indefinitely beyond that point.

Of course, as with any government action, the unintended consequence has been a complete lack of trust on the part of investors who have now seen that the government will leave them out in the cold if it suits their agenda.

Small wonder that it's proving difficult to get anyone to 'invest' in anything until the bailout details are ironed out and stabilized. The perceived government intervention risk is far too high.