So much for handing hedge funds $200B

Now, I've repeatedly mentioned that mortgages are secured debt. If you don't want to pay them, you can just hand over the house. That's fair, right? Banks should be at least as good at determining the current and predicting the future values of your house as you are, so it's not like you're pulling a fast one.

But, say that you held a large number of Class 3 Assets. Class 1, recall, was mark to market, or what you could sell it for. Class 2 was mark to model, or what you thought it would be worth in some abstract way. Class 3 Assets are mark to make believe. I'll give you an example. My mother and I dropped off some old CPUs and keyboards at Goodwill on Saturday. The guy asked us how much we wanted the receipt for.

"Twenty-five thousand dollars," I averred. Mom thought $50 was more reasonable, and it's her deduction, so that's what we got. But, there was no way we could sell these things, -- which is what I guess Goodwill plans to do, throwing a wrench in my metaphor -- and no good model for valuing them. So, their value was whatever we said it was.

Mortgage backed securities and their collateralized debt obligations are the same kind of thing. Unsellable, no easily determined value, Class 3 mark to make believe assets. The Fed just lent two hundred billion dollars in cash to 'financial institutions' secured by 'assets involving mortgage backed securities and their derived instruments.'

They don't have to pay that money back any more than you have to pay off your house. They can keep the money, and stick the taxpayer with the imaginary assets. This was all to create a temporary bump in the market, presumably because Barbara Bush still had some money in US-based securities. That's gone now; she's all set. I guess you can go back to shorting.