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In Paulson We Trust?

September 23, 2008 3 comments

The root cause of the liquidity freeze on Wall Street is clear:  Financial institutions, for various bad reasons that have been discussed at length elsewhere and are beside the point here, made huge bets that house prices would continue to defy gravity.  They didn’t.  Now the losses from those failed bets keep on popping up in unexpected places; no one knows who can be trusted.  For a bailout to solve the trust problem, it has to reveal who just got singed by the housing fallout, and who is still hiding third degree burns.  Until that uncertainty is resolved, investors are going to be justifiably cautious about putting their capital at risk. Read more…

Categories: financial crisis, Treasury