Contemplate that sentence for a second. It really does say a lot about how we got to this point, doesn’t it?

No Purchased
Loan permits the release or substitution of collateral if such release or
substitution (i) would create a “significant modification” of such Purchased
Loan within the meaning of Treas. Reg. ss. 1.1001 3 or (ii) would cause such
Purchased Loan not to be a “qualified mortgage” within the meaning of Section
860G(a)(3) of the Code (without regard to clause (A)(i) or (A)(ii) thereof).

Re: (vi) UCC Financing Statements for filing in each of the UCC Filing
Jurisdictions described on Exhibit XIII hereto, each naming Seller as “Debtor”
and Buyer as “Secured Party” and describing as “Collateral” all of the items set
forth in the definition of Collateral and Purchased Items in this Agreement,
together with any other documents necessary or requested by Buyer to perfect the
security interests granted by Seller in favor of Buyer under this Agreement or
any other Transaction Document;

(vii) any documents relating to any Hedging Transactions;

(viii) an opinion or opinions of outside counsel to Seller, substantially in
the form of Exhibit XIV;

Good point about too big to fail. Hadn’t occurred to me to frame it that way. I may use it and give you credit.

constantine.

Fair comment, but wonder how much of that is due to Citi/Abu Dhabi as opposed to this plan?

This is one where the devil will lie in the details, and until the target borrowers are more clearly defined, it is easy for observers to project their wishes upon it. I’ll admit freely to being skeptical and bearish, but research shows that the vast majority of people are optimistic, so they are likely to assume the best until they have cause to think otherwise.

Oh, and research shows that pessimists are much better at assessing odds than optimists.

I suspect we’ll eventually get all kinds of excellent in-depth reporting from the major media on the subprime mortgage affair after it’s too late to do us much good, except as a cautionary tale that some may remember the next time.

The Watergate analogy is apt, I think. We elected and re-elected Richard Nixon before the press figured out what he was capable of.

Several mortgage experts also said catagorising borrowers would be difficult, given that their financial information might never have been collected before. Also, a large percentage of adjustable rate subprime loans have already been sold to investors who would have to accept lower payments as part of the plan.

What I find interesting of late, is that the best news is coming from offshore, from London or Asia; guess one needs to follow the money! Its sad that we have such low standards these days in regard to American free speech and thus jounalism which in this stage of crisis, should be doing more and digging deeper! The reporters simply fail to have The Watergate passion! Sad!!

It normally applies to giant corporations said to play indispensable roles in our economic welfare.

In this case, it appears to apply to the borrowers, and this could be unprecedented. The borrowers have strength in numbers: collectively, they have become too big to fail, and the guys in suits can’t figure out a way to save themselves without saving the borrowers too.

By “rescuing” the borrowers, we enable them to continue to pay a significant portion of their wages into the system. If we let all those overstretched borrowers fail, those payments stop, and a lot of paper becomes just that, paper.

All that remains is to find out if some critical mass of the ultimate holders of that paper are willing to play nicely and accept less than they were promised by banks and brokers and bond ratings agencies and fund managers and so forth. And that is no small or simple question.