Filed under: Market matters, Citigroup Inc. (C), JPMorgan Chase (JPM), Federal Natl Mtge (FNM), Amer Intl Group (AIG), Wells Fargo (WFC), Housing, Cramer on BloggingStocks, MBIA Inc (MBI)
TheStreet.com’s Jim Cramer states that’s the real problem, and every little bit helps.
Many are decrying that the AIG (NYSE: AIG) (Cramer’s Take) bailout now helps the holders of the collateralized debt obligations (CDOs) who bought insurance against them from AIG. The idea is simple: These CDOs are worth, in many cases, next to nothing depending upon the vintages, geographies and FICO scores, but they will now be paid back at pretty much face value — AIG CEO Ed Liddy said the prices will be negotiated, but I don’t see how they have the ability to get any less because AIG guaranteed it and the U.S. isn’t abrogating any of these guarantees.
It’s an obvious windfall and still one more piece of the stinking puzzle that involves unwinding the bogus real estate finance that prevailed from 2004 to 2007. The more massive issue, though, is whether the government will then take over MBIA (NYSE: MBI) (Cramer’s Take) and Ambac (NYSE: ABK) (Cramer’s Take) — I know people at those companies say they don’t need it, so OK, they don’t … but let’s say they do for the purposes of reality — and have them make good on all of the credit default swaps they wrote against bad CDOs.
If the government is willing, they can buy several trillion dollars of these easily through this method and then sit on them and hopefully they’ll come back to some value.
Continue reading Cramer on BloggingStocks: Fix the home glut
Cramer on BloggingStocks: Fix the home glut originally appeared on BloggingStocks on Wed, 12 Nov 2008 09:30:00 EST. Please see our terms for use of feeds.
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