So longers as buyers and sellers can choose whether or not to strike deals, without illegal coercion of other sorts, I suspect you’d have to say that the price they reach is “fair.” Or at least, I guess a free-marketer would.

The public has lots of reasons to be angry about this. But a systemic economic collapse probably won’t assuage their (our) anger. One does get the sense that those who more or less run our national affairs are more circus ringmasters than sober accounts.

But perhaps that’s a reflection of our society as well. Descent into decadence is not an easy trend to reverse.

I agree wholeheartedly with the difficulty of determining market value of these peculiar assets — which is why we should, in fact, let the market set the value by seeing how steep of a discount these assets must take to be salable, not by having Hank Paulson and a group of Very Important People decide that, for instance, 78.22% of face represents an “appropriate” amount of taxpayer money to spend socializing the financial sector.

That way we wouldn’t have a massive government bureaucracy controlling half the housing market for too long and the damage would be more than painful enough to teach us a lesson without being too debilitating. And if treasury does initially buy at a solid discount, the pain will be shared between taxpayers and the overseas investors who bought these securities in the first place.

Of course I don’t have any idea what the securities would actually clear at, so maybe that’s just wishful thinking.

By the way, the “worst case” sales, such as Lone Star’s heavily discounted purchase of CMBS assets from Merrill, was even worse than the media reports. Merrill financed most of the Lone Star purchase on a non-recourse facility. I think Lone Star put in only 25% of equity, thus getting an enormous option at a cheap price; the benefit to Merrill was strictly one of accounting, since it still holds most of the downside risk on this asset, but can account for it as if this exposure has been “sold.”

I think that everyone needs to take a deep breath instead of panicking about the imminent collapse of American society and libeling Phil Gramm.

How right you are! I don’t trust Treasury, the Congress or the Federal Reserve to make the right decisions. Neither of the candidates have the courage to address the country and tell them the truth. I don’t expect President Bush to do the right thing either. I wonder, if Obama wins, how his supporters will react when they find out that the programs they want will not be possible. I wonder, if McCain wins, if those who caused this mess (like Phil Gramm) will be in place to continue the pillage.

PessimistMonkey is right. The dollar will fail; and it will be an awful day of reckoning! Although many farms failed during the Great Depression; most people lived in small towns and rural areas. The majority owned (at the least) a small patch of yard where a garden could be established and a small chicken coop could be kept. Can you imagine our densely populated cities without electricty and no food being trucked into them?

The Dollar will fail. It may not be this year, or even this decade, but it will be in my lifetime. There are no collective actions that can be organized, and the only control you have over your destiny is individual action: buy tangibles, trust only “sound money” like gold/silver, own a gun, stockpile food, avoid variable rate debt.

I can’t tell you whether the Reckoning will be apocalyptic (i.e., electric grid collapse, total societal breakdown, lack of readily purchasable food/heat, etc.), or chronic and low grade (i.e., periodic civil disturbance, extended high unemployment, shortage, etc.) If it’s #1 rather than #2, we’re all screwed.