I've been reading through some of the back postings of a fascinating and, IMHO, insightful financial blog by Karl Denninger called "The Market Ticker". He's been one of the few I've read who can tie all the financial mumbo-jumbo to plan-English explanations of the unfolding collapse.
For example, here's his most recent insight into the shenanigans that GMAC's pulling with their new Federal bail-out:
The government "buys" preferred equity that pays an 8% coupon. GMAC must pay that 8% coupon (9% if the government exercises the warrants)
GMAC turns around and loans out money at 0% which it has to pay 8% to acquire, and at the same time decides that it will make loans to people with credit scores significantly worse than average, when before they would make loans only to people with scores that were slightly better than average.
And we wonder how we got into this mess?
Exactly.
Comments