Welcome to European Tribune. It's gone a bit quiet around here these days, but it's still going.
loans with teaser (that is, artificially, temorarily low) rates.  When the higher rates kick in, which they WILL DO since that is specified in the contract, the homeowners will be over their heads.  A majority of THEM will default.  What happens then is fun speculation but we are talking way more than 5 % or 10 % defaults.  

This industry is set to crash and burn.  

WE don't KNOW that the banks are insolvent (though we think they are) because they will not let us see their books.  If we saw their books we THEN would know.  

But they are not fools:  There is no way they would let us see their books.  How bad is it?  Based on how rotten their own position is, they are not willing to other banks whose position is likely as bad.  

And is that not bad enough for you?  What more, really, do you need to know?  

If you were a rich foreigner holding dollars, why would you buy into these insolvent banks?  Well, your dollars are going to lose value no matter what you do.  By buying pieces of the financial system before the dollar loses value, you might--while taking the inevitable loss--acquire control.  

The Fates are kind.

by Gaianne on Sun Dec 16th, 2007 at 09:20:18 PM EST
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