The Q I Do NOT Hear Being Asked By Any MSM Which Is Critical To Solving The Financial Crisis....

[Blackhatjack]

Will Taxpayers' Money be transferred to Wall Street Banks and AIG to pay off Derivatives Held By Hedge Funds/Investors which bet on the US Housing Market Declining?

Or in other words, will the taxpayers' $$ be used by Bailout Recipients to pay off gambling debts (by way of derivatives) rather than unfreeze lending to mainstreet?

And no one denies that there remain trillions of $$ in derivatives out there ....

How can we solve the Financial Crisis for these Wall Street Big Boys without addressing these obligations? Answer: We can't.

And it still gets no air play from the MSM....

[Idealism]

1. If all these hedge funds shorted the housing market, they wouldn't have lost billions of dollars.

[Blackhatjack]

5. The derivatives they purchased were 'hedges' against the decline in the housing markets...

... and now they are looking to the issuers of the derivatives to make them good... but there is not enough liquidity to for them to make those derivatives 'good.'

As long as the hedge funds continue to carry the derivatives on their balance sheets as worth the amount they were issued for, these hedge funds not only appear solvent but way ahead on the payouts. But as soon as there is a confirmation that the derivatives will not be paid in full, that sinks their net worth ...

The derivatives will have to be addressed as the key to solving this financial crisis... and that is the reason AIG was 'too big to fail' and the govt was willing to invest over $100bil in AIG to keep them operating even though insolvent.

[Idealism]

6. That isn't the question you asked, though.

The derivatives were obviously not based upon the real estate market declining, but you can buy CDS protection for such a thing, essentially "shorting" an insurance policy. If all the hedge funds did this early enough, it would have cost them pennies on the dollar to insure.

[Amonester]

2. It's because M$M don't know "how it works"

since it's not a teenage girl that's missin' somewhere...

[tularetom]

3. MSM doesn't grasp these issues

or thinks the public is too stupid to understand or care.

Unfortunately, on the latter point they are probably correct.

[BadgerKid]

4. Maybe ask Obama yourself...

http://www.whitehouse.gov/OpenForQuestions/

[Blackhatjack]

7. Here is your LINK to an excellent WIRED article that gives details....

The betting against banks and the housing markets has created an uncertainty as to whether certain derivatives will be 'made good' --which will require infusion of taxpayers' money to accomplish that much sought after position by hedge funds/investors. As long as there is a chance they will be made good, the holders will continue to carry them at the full 'paper value'. Without taxpayers' money infused into AIG, the issued derivatives would be worth much, much less than their stated value. So you cannot fix the financial crisis without addressing the derivatives question, and it is at that point that the truth comes out as to who gets paid and who does not.


http://blog.wired.com/business/2009/03/things-arent-to.html

Things Aren't Tough All Over: Hedge Fund Elites Reap Billions in '08

"Despite a year-long global economic meltdown that only got worse as the year wore on, the world's 25 most successful hedge fund managers raked in a total of $11.6 billion in 2008 — their third best haul this decade. The secret to their success? Well, some of it is a secret. But if you guessed big bets against banks and the housing market you'd be on the right track."

SKIP

"John Paulson (Paulson & Co.) took in $2 billion by shorting the very financial instruments whose abuse are cited as having brought the world the brink of an economic apocalypse. "John Paulson will forever be remembered as the man who made billions off the credit crisis," Alpha says. "As early as 2005, he was shorting risky pools of collateralized debt obligations and buying credit default swaps on the cheap."

That would be the credit default swaps which would have cause insurer American Insurer Group (AIG) to implode if the United States hadn't pumped in $170 billion in taxpayer money to bail it out in an effort to the world's credit markets liquid."

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