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Author: Soleilzy Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 1568  
Subject: Am I stupid? Date: 9/26/2008 10:54 AM
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OK: I'm confused. Can someone answer one or two of my questions as to what is being proposed by the administration in their three page proposal?

1. What does Paulson intend buying? Packages made up of individual mortgages with several obligations (not many but individual) to the package owner? Ownership interests in some maker-entity owning the mortgages with several obligations to the owning entity? Are they not mortgage debt instruments but securities? Issuing guarantees to holders of packages or individual mortgages or of the debt obligations of the maker entity? Guarantees behind credit derivative swaps? Guarantees of collateral behind CDOs? What?

2. Given the answer/s to the above, with whom does Paulson negotiate to determine the purchase price of whatever he is buying with those monies borrowed under my repayment obligation to the Chinese or the Arabs?

3. There is vague talk about "foreclosure." What is the status of the collateral, (Palin's house)? I assume that foreclosure laws are state laws. Where does that leave some subsequent "holder" of the mortgage instrument who might be in Dubai or Vermont? Do all the rights of a succured lender pass with the packaging, repackaging, sale, partial default and so forth to the next owner of that body of obligations, whoever that may be? And who renegotiates the mortgage so foreclosure is avoided? Does the $700B include lawyer's fees?

4. How does Paulson's buying whatever he buys provide liquidity to the banks? Isn't it a boon to the investors in these mortgage backed securities?

5. Is the system going to melt down because the investors have to mark to market the value of these packages? That means that some will write off some and will need more capital for ratio purposes. I think this means the commercial banks. So, the commercial banks are holding these packages in portfolio? I thought that most of these things were passed on to Fannie and Freddie. Why the writedown? Is the real problem that of commercial real estate is these busted portfolios? Does anybody seriously think that the commercial banks are going to leap back into the lending market for mortgages or small businesses? Hello!

6. How does Paulson take an equity stake? In what? The banks? Dilution not equal to writeoff?

7. Whose pay is to be limited to that of George Bush and how is that determined and/or enforceable?

8. Are private sector firms going to manage this? How about Haliburton?

Please, somebody, help me out.
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