This is my understanding: the $700 billion bailout is to purchase potentially worthless mortgage CDOs from the banks and then somehow sell these worthless mortgages for a profit some time in the future? Meanwhile the banks, relieved of the tonnage of bad loans strung around their necks, are now free to start loaning again?
Right back to business as usual? There has been no talk about how Americans are living beyond their means in the first place, both as families and individuals, and as a country. No talk about having to save money rather than borrow in order to purchase a couch or a car or whatever.
What am I missing?
And how is the new RTC going to recoup the $700B by selling worthless mortgages in the future? Aren’t they worthless, or worth much less, due to the housing market being an utterly unsustainable bubble? I’ve heard the pundits say they expect a profit to be made within 2 to 3 years. What don’t they - or me - understand about "bubble bursting"? Seems to me that it could take 30 or 40 years before the housing prices returned to their 2006 peaks, if ever. A lot of us will be dead by then.
Nope, I’m not getting this bailout thing at all…