Buddy,
Could You Spare Us $15 Billion?
From The
Economist print edition - January 24, 2008
New York
By Matthew Valencia
It
remains unclear how any bail-out would be structured. One
possibility
is to
create the equivalent of “bad banks”,
ringfencing the monolines' tarnished CDO operations to allow
their municipal businesses to continue unencumbered, or be sold.
This would also assuage fears that mishaps in securitisation
might bring down the public-finance markets, says Janet Tavakoli,
a consultant. Another idea would be to create a so-called “excess-of-loss
pool” that would allow the monolines to reinsure their
nastiest tail risks.
End
of Excerpt
JT
Note: It is also
possible there will be an attempt to ask investment banks to “take back” their
CDO positions.
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