# Fannie Mae, Freddie Mac, Lehman Brothers, Merrill Lynch... **URL:** \ **Category:** Great Debates\ **Created:** [September 15, 2008, 2:29am UTC](https://boards.straightdope.com/t/fannie-mae-freddie-mac-lehman-brothers-merrill-lynch/463650 "2008-09-15T02:29:45Z")\ **Posts on this page:** 20\ **Page:** 7
**Author:** ![gonzomax](https://avatars.discourse-cdn.com/v4/letter/g/e8c25b/32.png) [@gonzomax](https://boards.straightdope.com/u/gonzomax)\ **Post date:** [September 17, 2008, 4:47pm UTC](https://boards.straightdope.com/t/fannie-mae-freddie-mac-lehman-brothers-merrill-lynch/463650/121 "2008-09-17T16:47:27Z")
> [@wmfellows](#): > > Amigo, **this is completely and utterly wrong** : > > The very business of banks is to take risk. Bank failure from the inherent tension of taking short deposits and lending them long is **endemic** in history. Of course banks have projected the image of conservative, but it has never been true, in the sense you are implying. NEVER. > > Bank runs, collapses, etc. were a regular and frequent feature historically… indeed have never gone away even with regulation, rules, risk management, etc. > > Lending is gambling. The only question is, are your bankers good gamblers playing a smart game, or are they not. > > _PS: try to get your bloody puncuation to English standard eh?_ In 1933 the Glass/Steagall act was passed. It made a firewall between commercial and investment banks. The government ,through FDIC would back commercial banks. Investment banks were on their own. In 1999 Gramm passed legislation gutting Glass. After that the distinction between commercial and investment banks was blurred. So both banks started gambling with all the money they could get their paws on. They made loans they knew were bad or iffy, figuring they could get them packaged and sold in masse to some huge bank. It was not their problem any more. Regulation was killed and the thieves ran wild. So now we are bailing out the investment banks. That is not supposed to be done. If we bailed out the home owners the banks could get on solid ground again. Four million more homeowners are in trouble. It is far from over. Punctuation has a T in it. ---
**Author:** ![Digital\_Stimulus](https://avatars.discourse-cdn.com/v4/letter/d/aeb1de/32.png) [@Digital\_Stimulus](https://boards.straightdope.com/u/Digital_Stimulus)\ **Post date:** [September 17, 2008, 6:02pm UTC](https://boards.straightdope.com/t/fannie-mae-freddie-mac-lehman-brothers-merrill-lynch/463650/122 "2008-09-17T18:02:57Z")
> [@mazinger\_z](#): > > Yes, it probably will, but how has this affected the GDP now? We’ve seen growth. When there are two quarters of negative growth, let me know, then I’ll call it a recession. I’ve seen the stat that the April-June GDP was revised upward to 3.3% (after an aenemic January-March growth of \<1%). But, IIRC, that revision upwards was attributed to the stimulus checks handed out by the government. Is that the case? If so, doesn’t it taint the recent GDP as a measure of (non)recession? ---
**Author:** ![Clu-Me-In](https://avatars.discourse-cdn.com/v4/letter/c/dfb087/32.png) [@Clu-Me-In](https://boards.straightdope.com/u/Clu-Me-In)\ **Post date:** [September 17, 2008, 6:13pm UTC](https://boards.straightdope.com/t/fannie-mae-freddie-mac-lehman-brothers-merrill-lynch/463650/123 "2008-09-17T18:13:19Z")
It’s the standard operating procedure of the **Ripoffblican Party**. Happens to America every 8 years or so. Hey!! we all saw this coming with Dubya, but we kept dropping our pants and bending over.:mad::mad: ---
**Author:** ![LonghornDave](https://avatars.discourse-cdn.com/v4/letter/l/a87d85/32.png) [@LonghornDave](https://boards.straightdope.com/u/LonghornDave)\ **Post date:** [September 17, 2008, 6:22pm UTC](https://boards.straightdope.com/t/fannie-mae-freddie-mac-lehman-brothers-merrill-lynch/463650/124 "2008-09-17T18:22:35Z")
> [@gonzomax](#): > > In 1933 the Glass/Steagall act was passed. It made a firewall between commercial and investment banks. The government ,through FDIC would back commercial banks. Investment banks were on their own. > In 1999 Gramm passed legislation gutting Glass. After that the distinction between commercial and investment banks was blurred. So both banks started gambling with all the money they could get their paws on. They made loans they knew were bad or iffy, figuring they could get them packaged and sold in masse to some huge bank. It was not their problem any more. Regulation was killed and the thieves ran wild. > So now we are bailing out the investment banks. That is not supposed to be done. If we bailed out the home owners the banks could get on solid ground again. Four million more homeowners are in trouble. It is far from over. > Punctuation has a T in it. I’m not sure that I agree that the Gramm Leach Bliley act has had a dramatic effect on the current mortgage crises. It seems like those hurt the most, savings & loans (like Indymac and Washington Mutual) and the investment banks (like Bear Stearns, Lehman, Merrill) would have been just add badly hurt without the passing of this act. I think you could probably make the case that Citibank may have taken on additional risks, but I don’t think this is anywhere near the fundamental cause of the problem. ---
**Author:** ![LonghornDave](https://avatars.discourse-cdn.com/v4/letter/l/a87d85/32.png) [@LonghornDave](https://boards.straightdope.com/u/LonghornDave)\ **Post date:** [September 17, 2008, 6:30pm UTC](https://boards.straightdope.com/t/fannie-mae-freddie-mac-lehman-brothers-merrill-lynch/463650/125 "2008-09-17T18:30:03Z")
> [@Clu-Me-In](#): > > It’s the standard operating procedure of the **Ripoffblican Party**. > > Happens to America every 8 years or so. Hey!! we all saw this coming with Dubya, but we kept dropping our pants and bending over.:mad::mad: Putting the blame for this on the Republicans is like putting the blame for the Tech bubble on the Democrats: pointless, counterproductive, and untrue. There are plently of reasons for this, but what are you going to blame Bush for, the reappointment of Greenspan and his minority home ownership plan? ---
**Author:** ![Clu-Me-In](https://avatars.discourse-cdn.com/v4/letter/c/dfb087/32.png) [@Clu-Me-In](https://boards.straightdope.com/u/Clu-Me-In)\ **Post date:** [September 17, 2008, 6:37pm UTC](https://boards.straightdope.com/t/fannie-mae-freddie-mac-lehman-brothers-merrill-lynch/463650/126 "2008-09-17T18:37:40Z")
> [@LonghornDave](#): > > what are you going to blame Bush for, the reappointment of Greenspan and his minority home ownership plan? Yup… all of that and [**the Cost of the Iraqi War he lied us into**](http://www.mediazine.net/iraq/). Yep you betcha!! ---
**Author:** ![gonzomax](https://avatars.discourse-cdn.com/v4/letter/g/e8c25b/32.png) [@gonzomax](https://boards.straightdope.com/u/gonzomax)\ **Post date:** [September 17, 2008, 6:46pm UTC](https://boards.straightdope.com/t/fannie-mae-freddie-mac-lehman-brothers-merrill-lynch/463650/127 "2008-09-17T18:46:25Z")
> [@First\_Amongst\_Daves](#): > > Colour me dry, but isn’t this the downside of commercial risk? > > You trust people with your money, and if they cock up, isn’t that the risk you run balanced against the possible returns? > > And while the AIG deal isn’t a bail-out, aren’t the Freddie/Fannie bail outs nationalisation of two big financial institutions? What happened to the free market? > > Banks will enter into stupid risks if they know the Fed will bail them out. Why should taxpayers be the safety net for the trapeze acts of the un-coordinated? That was the point of the Glass /Steagall act. We would back commercial banks and investment banks were on their own. They could take risks but we would not bail them out. Now we are. So once they get stabilized ,they can go back to business as usual. They should be allowed to fail. Then ,if they get back in later they would be more likely to be careful. ---
**Author:** ![mazinger\_z](https://avatars.discourse-cdn.com/v4/letter/m/5f9b8f/32.png) [@mazinger\_z](https://boards.straightdope.com/u/mazinger_z)\ **Post date:** [September 17, 2008, 6:53pm UTC](https://boards.straightdope.com/t/fannie-mae-freddie-mac-lehman-brothers-merrill-lynch/463650/128 "2008-09-17T18:53:31Z")
> [@Digital\_Stimulus](#): > > I’ve seen the stat that the April-June GDP was revised upward to 3.3% (after an aenemic January-March growth of \<1%). But, IIRC, that revision upwards was attributed to the stimulus checks handed out by the government. > > Is that the case? If so, doesn’t it taint the recent GDP as a measure of (non)recession? The only taint to GDP is when inflation outstrips any real gains. We haven’t seen that…yet (and don’t bother with a quarterly review of inflation, those numbers are too short term (because of the way the data is collected), let’s see what inflation is for the year). If the stimulus check indeed revise it upward 3.3% (that’s huge, more than I would’ve forecasted), then the stimulus checks did as it intended, i.e. grow/stimulate the economy. However, I do believe that inflation will factor into this growth. ---
**Author:** ![Merkwurdigliebe](https://avatars.discourse-cdn.com/v4/letter/m/74df32/32.png) [@Merkwurdigliebe](https://boards.straightdope.com/u/Merkwurdigliebe)\ **Post date:** [September 17, 2008, 7:11pm UTC](https://boards.straightdope.com/t/fannie-mae-freddie-mac-lehman-brothers-merrill-lynch/463650/129 "2008-09-17T19:11:32Z")
While I’m not happy about all of these bailouts that are occuring, in the grand scheme of things, they aren’t all that expensive. 85 billion for AIG. That sucks but the outcome of AIG failing seems to be like it would cost us a LOT more than 85 billion in productivity loss. Also the Iraq war costs us far more and we have essentially nothing to show for it. Another question here guys: Just how much responsibility do the heads of Lehman Brothers and AIG have for the failure of their organizations? Watching CNBC all day yesterday (I know… but where can I turn for analysis? ) there seemed to be much chastising of the CEO of Lehman Brothers. They said that he refused at every turn to see the reality for what it was. I suppose what they were saying is that he thought the old way of doing things would eventually be validated again. They were saying that the more responsible groups were deleveraging as early as the beginning of this year in order to prepare. I was reading this about Citibank because they were saying that Is this the case? Was it simply bad leadership that caused this? Are most other folks prudently deleveraging and taking less risky positions? I read that my bank, Citibank had started doing this in January. At any rate, it’s hardly surprising that this is what has to happen, and as long as it doesn’t royally screw up our economy, I feel this is a good thing. We should have been more suspicious about what was going on when the market kept doing well despite any particular reason for it to do so. ---
**Author:** ![LonghornDave](https://avatars.discourse-cdn.com/v4/letter/l/a87d85/32.png) [@LonghornDave](https://boards.straightdope.com/u/LonghornDave)\ **Post date:** [September 17, 2008, 7:15pm UTC](https://boards.straightdope.com/t/fannie-mae-freddie-mac-lehman-brothers-merrill-lynch/463650/130 "2008-09-17T19:15:02Z")
> [@Clu-Me-In](#): > > Yup… all of that and [**the Cost of the Iraqi War he lied us into**](http://www.mediazine.net/iraq/). Yep you betcha!! So your position is that the Iraq War is a major cause of the mortgage crises? ---
**Author:** ![Digital\_Stimulus](https://avatars.discourse-cdn.com/v4/letter/d/aeb1de/32.png) [@Digital\_Stimulus](https://boards.straightdope.com/u/Digital_Stimulus)\ **Post date:** [September 17, 2008, 7:16pm UTC](https://boards.straightdope.com/t/fannie-mae-freddie-mac-lehman-brothers-merrill-lynch/463650/131 "2008-09-17T19:16:09Z")
> [@mazinger\_z](#): > > The only taint to GDP is when inflation outstrips any real gains. We haven’t seen that…yet (and don’t bother with a quarterly review of inflation, those numbers are too short term (because of the way the data is collected), let’s see what inflation is for the year). OK (and thank you for responding). I ask because I’ve seen _lots_ of people trumpet “GDP hasn’t had negative growth two quarters in a row, therefore we _can’t_ be in a recession”. But I’ve not seen one acknowledge the (possible) effect of the stimulus checks (_if_ that’s the reason for the adjusted 2nd quarter number). I seem to recall that without the stimulus checks’ influence, the GDP would have been negative that quarter. Which makes those arguments even more suspect than they would be otherwise (e.g., not accounting for short time frame, adhering to two quarters of negative GDP as the only measure for recession, etc.). ---
**Author:** ![Clu-Me-In](https://avatars.discourse-cdn.com/v4/letter/c/dfb087/32.png) [@Clu-Me-In](https://boards.straightdope.com/u/Clu-Me-In)\ **Post date:** [September 17, 2008, 7:22pm UTC](https://boards.straightdope.com/t/fannie-mae-freddie-mac-lehman-brothers-merrill-lynch/463650/132 "2008-09-17T19:22:34Z")
> [@LonghornDave](#): > > So your position is that the Iraq War is a major cause of the mortgage crises? I said that? I thought you said that.:dubious: Please try not to set up what you feel my position is until I state it. That position I’m in now is …ANGRY… at this administration and the mess they have us in. ---
**Author:** ![Evil\_Captor](https://avatars.discourse-cdn.com/v4/letter/e/f17d59/32.png) [@Evil\_Captor](https://boards.straightdope.com/u/Evil_Captor)\ **Post date:** [September 17, 2008, 7:41pm UTC](https://boards.straightdope.com/t/fannie-mae-freddie-mac-lehman-brothers-merrill-lynch/463650/133 "2008-09-17T19:41:53Z")
> [@Huerta88](#): > > Mind you, all these bailouts amount to socialism – not just in the sense of government spending, but in the sense that the United States is now playing (potentially) mortgage banker to half the homes in the country, and is running 80% of a giant insurance company. Since I have no reason to believe the United States government knows the first thing about running businesses, this seems very troubling. Is the plan to unload them back into the private markets when things “stabilize?” Or will the gov’t end up owning insurance companies, mortgage banks, car companies . . . ad infinitum? Bolshevism, finally accomplished. I think it was Marx who said, “Give a capitalist enough rope and he will hang himself.” ---
**Author:** ![mazinger\_z](https://avatars.discourse-cdn.com/v4/letter/m/5f9b8f/32.png) [@mazinger\_z](https://boards.straightdope.com/u/mazinger_z)\ **Post date:** [September 17, 2008, 7:44pm UTC](https://boards.straightdope.com/t/fannie-mae-freddie-mac-lehman-brothers-merrill-lynch/463650/134 "2008-09-17T19:44:44Z")
> [@Digital\_Stimulus](#): > > OK (and thank you for responding). I ask because I’ve seen _lots_ of people trumpet “GDP hasn’t had negative growth two quarters in a row, therefore we _can’t_ be in a recession”. But I’ve not seen one acknowledge the (possible) effect of the stimulus checks (_if_ that’s the reason for the adjusted 2nd quarter number). > > I seem to recall that without the stimulus checks’ influence, the GDP would have been negative that quarter. Which makes those arguments even more suspect than they would be otherwise (e.g., not accounting for short time frame, adhering to two quarters of negative GDP as the only measure for recession, etc.). I haven’t done a model of the economy since college, and I haven’t even used my econ degree professionally (though, I was offered a position at a large international bank before I decided to go to law school), so my opinion is that the stimulus checks weren’t that big a factor in the first place. It simply wasn’t a lot of money sent out. I only found one study that said that it was going to do a lot of good, though they seemed to base their conclusion on the 2001 stimulus package. Anyway, the government sent back, what, 1.5% of the GDP back to American consumers? There isn’t really a not a whole lot that that can do. Even with a generous multiplier effect (A buys something from B who then buys something from C, etc.), someone is using the entire check to pay down bills (like my whole family, and I would’ve too, if I received one). I think the recent upward GDP revision was mainly due to increased exports from a weak dollar (the data in this area adjusts rapidly, and is more easily reported, so I’ll argue this point), supplemented by the stimulus package. This reasoning would also explain the large gap from the initial estimate to the figures that you cited earlier. ---
**Author:** ![Digital\_Stimulus](https://avatars.discourse-cdn.com/v4/letter/d/aeb1de/32.png) [@Digital\_Stimulus](https://boards.straightdope.com/u/Digital_Stimulus)\ **Post date:** [September 17, 2008, 7:48pm UTC](https://boards.straightdope.com/t/fannie-mae-freddie-mac-lehman-brothers-merrill-lynch/463650/135 "2008-09-17T19:48:24Z")
> [@Digital\_Stimulus](#): > > I seem to recall that without the stimulus checks’ influence, the GDP would have been negative that quarter. OK, so I felt somewhat obligated to go dig up some information on the GDP adjustment for the 2nd quarter '08. As it turns out, my memory of negative predictions were incorrect; the actual number was 1.9% (after 0.9% growth in the first quarter). In addition\*, [some](http://biz.yahoo.com/ap/080828/wall_street.html) [cites](http://www.forbes.com/2008/08/28/mbia-lehman-fannie-markets-cx_cw_0828transvideo3.html) do not mention the stimulus checks, while [others](http://www.istockanalyst.com/article/viewarticle+articleid_2558400.html) do mention them as (at least) a partial contributor. An example of explicitly dismissing the stimulus checks’ influence can be seen [here](http://newsbusters.org/blogs/tom-blumer/2008/08/28/media-some-experts-wont-let-go-recession-despite-sharp-upward-2q-gdp-rev). As that page seems to be heavily (and perhaps irrationally) partisan (in the Republicans’ favor, naturally), I tend to give the idea more credence than I otherwise might. \*: I have no idea about the quality and/or biases of these cites. ---
**Author:** ![Evil\_Captor](https://avatars.discourse-cdn.com/v4/letter/e/f17d59/32.png) [@Evil\_Captor](https://boards.straightdope.com/u/Evil_Captor)\ **Post date:** [September 17, 2008, 8:03pm UTC](https://boards.straightdope.com/t/fannie-mae-freddie-mac-lehman-brothers-merrill-lynch/463650/136 "2008-09-17T20:03:54Z")
> [@Clu-Me-In](#): > > It’s the standard operating procedure of the **Ripoffblican Party**. > > Happens to America every 8 years or so. Hey!! we all saw this coming with Dubya, but we kept dropping our pants and bending over.:mad::mad: Speak for yourself, buddy. I never voted for the idiot in chief. ---
**Author:** ![spazattak](https://avatars.discourse-cdn.com/v4/letter/s/8e8cbc/32.png) [@spazattak](https://boards.straightdope.com/u/spazattak)\ **Post date:** [September 18, 2008, 12:21am UTC](https://boards.straightdope.com/t/fannie-mae-freddie-mac-lehman-brothers-merrill-lynch/463650/137 "2008-09-18T00:21:58Z")
> [@DragonAsh](#): > > You are falling into the same trap that the media at large has - ‘inflation is rising! Unemployment is up! We’re doomed!’ Yes, it feels like a recession, and no one is saying we’re not heading for tougher times ahead. But - I’m not a McCain follower - the essence of his message (our economy’s fundamentals are still sound) was essentially correct. Note, for example, that inflation is easing (oil and other commodities now down 30%+ since the June highs). Energy prices are already coming down, and will show up in CPI data in the next couple of months. I wasn’t saying we were doomed - just that there would probably be sustained rough patch over the near term. Sure inflation will ease from the 5.5% year-to-year we saw in the previous months, but it’ll still be relatively high and will stay there until something’s done about interest rates. You said the fundamentals were strong - you need to back that up with something other than a paltry 1.9% projected year GDP growth (compared to 5% inflation) - cuz that kinda sucks. Especially when you take into consideration US workers are more productive that ever. > [@](#): > > What we have here is a -housing market- problem, and is being manifested in the financial sector, where too many financial institutions were overly exposed with too much leverage. Yes, it is going to impact credit markets everywhere, from credit cards to student loans, etc. The recent slide in commodity prices notwithstanding, we are probably facing a prolonged uptrend in food/energy prices, due to rising demand from emerging markets. But the US fundamentals are fine - as evidence, I would repeat that we have yet to see even one quarter of negative growth. Contrast that with Japan, where 2Q GDP was down 3%. Why is it when things are diversified, people only see the upside and not the potential downside? It started out as a housing market problem. Because everyone is ‘diversified’ everyone either had direct exposure to the huge losses in those investments, or indirect by way of an investment in someone else who had an investment in it. Dude.. 3 of the 5 huge investment banks have collapsed. Now the largest insurance company in the world can’t meet its obligations without help from Uncle Sam. You’re going to see enormous ripple effects from that. You’ve just seen the beginning of job losses. We’re just now seeing the affects of this -housing market problem- as it reverberates through the economy. I’d give it some more time before saying ‘the fundamentals are strong’ because it sure as shit isn’t trending that way. I wouldn’t go so far as to say ‘the fundamentals are poor’ either - but they actually are trending that way. Job losses are beginning to increase, inflation is beginning to rise, GDP growth has slowed to a crawl… I don’t think you could make pronouncements either way at this point, but the trend is very clear. ---
**Author:** ![DragonAsh](https://avatars.discourse-cdn.com/v4/letter/d/db5fbb/32.png) [@DragonAsh](https://boards.straightdope.com/u/DragonAsh)\ **Post date:** [September 18, 2008, 1:54am UTC](https://boards.straightdope.com/t/fannie-mae-freddie-mac-lehman-brothers-merrill-lynch/463650/138 "2008-09-18T01:54:31Z")
> [@Digital\_Stimulus](#): > > OK (and thank you for responding). I ask because I’ve seen _lots_ of people trumpet “GDP hasn’t had negative growth two quarters in a row, therefore we _can’t_ be in a recession”. But I’ve not seen one acknowledge the (possible) effect of the stimulus checks (_if_ that’s the reason for the adjusted 2nd quarter number). > > I seem to recall that without the stimulus checks’ influence, the GDP would have been negative that quarter. Which makes those arguments even more suspect than they would be otherwise (e.g., not accounting for short time frame, adhering to two quarters of negative GDP as the only measure for recession, etc.). The fiscal stimulus certainly played a factor, but if I recall correctly, a) it wasn’t much of a boost, and b) the biggest factor behind the upward revision to 2Q growth was -trade- (i.e., exports) - in other words, foreigners without those stimulus checks are also still buying US goods and services. I’m not sure if the higher energy & food prices had any impact on spending in 2Q - maybe the higher prices won’t factor in the data until 3Q? In which case 3Q consumer spending very well could fall off quite a bit next quarter. But anyway, let’s take a look at some of the GDP components recently. Consumer spending? Contributed 2% to 3Q 07 GDP, followed by positive contributions of 1%, 0.9%, and 1.7%. How about exports? Up 23%, 4.4%, 5%, and up 13.2% last quarter. Business investment has been down 12%, 6%, and 12% the last three quarters, but this is entirely due to falling -residential- investment (remember? This is a -housing market- problem). Residential spending has fallen 21%, 27%, 25% and 16% the last four quarters, but non-residential and equipment spending is healthily positive (non-residential investment up 13.6% last quarter). 2Q GDP growth would have been even stronger except for a 50% fall in inventory - almost entirely due to valuation adjustments to reflect the higher commodity prices. The key for 3Q and 4Q will be a) to what extent the global economic slowdown hurts exports, and b) if the recent slide in energy and food prices can hold long enough to offset the drop-out of the 2Q stimulus checks. The outlook is indeed troubling – I’m not denying that. Slower growth by overseas economies (especially Japan and Europe) means they buy less US goods. But that certainly doesn’t reflect on any ‘unsound fundamentals’ of the US economy - in fact, conditions are almost certainly better in the US than in most other countries around the world. Japan, for example, spend the last 5 years or so relying on the US economy instead of restructuring and working on stimulating domestic demand. They have no where to turn now – and they have by far the highest level of government debt vs GDP of any G7 nation. Corporate profits were down last quarter, which has worrying implications for wage growth. Job losses and unemployment are also a concern, of course. And businesses appear to be spending less as well. But don’t discount the positive impact a fall in gas prices may have - for example, the University of Michigan’s consumer confidence survey jumped over 10 points in early September to its highest reading since -January-, and expectations for inflation 1 year out eased as well (4.8% to 3.6%). Personally? I agree we’re in for some tough times, but neither do I think it’s the end of the world. I think we’ll see several more months of lousy new housing starts, weaker consumer spending, and probably slower exports growth (esp. from Japan and Europe). Slower global econ growth –should-, however, keep commodity and energy prices in check. I think we’ll start to see a bottom in housing by late spring next year as prices bottom out and excess inventory is squeezed out. ---
**Author:** ![gonzomax](https://avatars.discourse-cdn.com/v4/letter/g/e8c25b/32.png) [@gonzomax](https://boards.straightdope.com/u/gonzomax)\ **Post date:** [September 18, 2008, 4:03am UTC](https://boards.straightdope.com/t/fannie-mae-freddie-mac-lehman-brothers-merrill-lynch/463650/139 "2008-09-18T04:03:30Z")
The fundamentals of the economy are not strong. There are 4 million more mortgages that could hit foreclosure. We have not dealt with that. It we had helped them, we would be far better off. They could have stayed in their homes and made their house payments. That could have stabilized the economy. This bailout of the big guys does not fix a damn thing. ---
**Author:** ![SmartAleq](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/smartaleq/32/163_2.png) [@SmartAleq](https://boards.straightdope.com/u/SmartAleq)\ **Post date:** [September 18, 2008, 5:26am UTC](https://boards.straightdope.com/t/fannie-mae-freddie-mac-lehman-brothers-merrill-lynch/463650/140 "2008-09-18T05:26:33Z")
Apropos of this thread–I saw this on [The Big Picture](http://bigpicture.typepad.com/comments/2008/09/laymans-explana.html)–a layman’s explanation of the whole bailout situation and the difference between Lehman Brothers vs Bear Stearns vs AIG and I thought it was amusing: [QUOTE=Barry Ritholtz] I got called yesterday from the producers of The Daily Show, who asked for an explanation of this understandable to the “lay person.” Here is what I said to them: ``` • Lehman Brothers was like the little kid pulling the tail of a dog. You know the kid is going to get hurt eventually, and so no one is surprised when the dog turns around and bites the kid. But the kid only hurts himself, so no one really cares that much. • Bear Stearns is the little pyro -- the kid who was always playing with matches. He could harm not only himself, but burns his own house down, and indeed, he could have burnt down the entire neighborhood. The Fed stepped in not to protect him, but the rest of the block. • AIG is the kid who accidentally stumbled into a bio-tech warfare lab . . . finds all these unlabeled vials, and heads out to the playground with a handful of them jammed into his pockets. ``` [/QUOTE] [Previous page](https://boards.straightdope.com/t/fannie-mae-freddie-mac-lehman-brothers-merrill-lynch/463650.md?page=6) [Next page](https://boards.straightdope.com/t/fannie-mae-freddie-mac-lehman-brothers-merrill-lynch/463650.md?page=8)