Tuesday, February 26, 2008

Not to be overlooked

There's a more direct way in which we end up with all this bad debt. Banks take FDIC-insured deposits, buy inflated houses, let people live there as long as they pay part of the interest with their option ARM, and then foreclose at the reset.

So... then they have this house, nobody paying interest, and no way to get rid of it. They just knock it over and plow it into the earth. But, this is expensive, and while the managers are zooming around in their foreign-built high performance convertibles and smoking cocaine rolled up in $100 bills, the bank fails. And the FDIC is on the hook for the money. The FDIC, not to put too fine a point on it, being funded by me. And to some extent you.

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