I understand it a little different.September 15 2008 at 12:46 PM
|noob (Login huskerdu2)|
Response to The Credit Bubble: Deregulation Gone Wild
From what I understand, the problem with Bear-Stears, Lehman, Merril, and now AIG is the same root cause as the Fannie Mae and Freddie Mac problem. These institutions were allowed to make the same high-credit risk investments - namely buying risky home-mortgages. As the government bails out Fannie Mae & Freddie Mac, the reality of the problem is now clear. The government cannot bail out Lehmen, Merril, and AIG as well. So their stocks tank, their margins are called, and the death-spiral starts.
So I guess, that does make the system fragile.