Please note that Wilbur Ross, the author of this piece, is “a billionaire investor who specializes in turning around underperforming companies” who “sees investment opportunities for “vulture capitalists” in the coming banking carnage.” He has a vested interest in driving down the stock prices in order to purchase them at bargain basement prices. That is the definition of a “vulture capitalist.” Keep in mind the point of view of this author when you read this piece.

As seen today with a tumbling market effected by Lehman’s collapse, will the economy be able to handle itself if AIG is next? The short answer is “yes.” Further, the US market is down 2.26%. I think characterizing that as a “tumbling market” is a bit of a stretch.

Hi Sherrie, I’m so happy we agree on something. I’m happy to join you in not panicking.

Who’s a Republican?

Hi Rocky, The government is not bankrupt. It’s the strongest financial center in the world. Your CD is insured. If you have less than $100k in one bank, it’s insured. If you have more, let me know and I give you the links to check insurance. Your CDs aren’t tied to stocks and bonds. Stocks and bonds are never insured. Their value is determined by the capital markets. SIPC insures the fact that securities you own through a brokerage will be available to you. IndyMac savers got their insured money within 2 weeks. That’s about the average. Hope these answers were helpful, Rocky.

English, Gaelic, French and abstract math.

Frank, Nearly everyone I know works on Wall St and in financial centers. They are not panicking. They are acknowledging that a brokerage firm filed for bankruptcy protection under Chapter 11. The banking system is intact. The banking system is not collapsing. The markets opened down, but in an orderly fashion. This is a difficult situation made more so by people who gleefully spread the word that the sky is falling. The sky is not falling, and those who spread panic are, in my opinion, acting irresponsibly.

Hi Sherrie, Please provide credible evidence that the country is on the brink of a Depression.

Okay, Frank. I read them. I think you’re irresponsible. Lehman Brothers filed Chapter 11. The housing market is in a deep correction exacerbated by monitization of pooled securities containing a portion of sub-prime loans. That is the situation. Look on the next page for an estimate of the amount of those loans on the FDIC site. 12.2% of assets are delinquent. That is a fact. 9.8% of those delinquent assets are fully or partially guaranteed by the US government. That is a fact. Causing panic is irresponsible and will exacerbate the problem.

Hi Carol, Here’s a little background. Social Security Trust fund balance is currently an “IOU” by the Federal government. Congress has spent the trust fund, and uses the full faith and credit of the US government to repay it. Long term performance of the stock market - 10% annually (since 1926, with wild, volatile swings) Long term performance of the bond market - 5% annually (since 1926, with less volatility) Long term rate of inflation - 3.5% The proposal is to give social security participants THE OPTION of putting some or all their contributions into a conservative mix of stocks and bonds. Pro - Congress couldn’t spend your money (it would actually exist) and would grow long term in excess of inflation. Con - Stock and bond markets are volatile. A mix of the two would have some potential volatility. For young people, it would be a great idea - for older people, less so. Here’s the current proposal http://www4.fdic.gov/sdi/main.asp

This link http://www4.fdic.gov/sdi/main.asp provides the latest information from the FDIC with respect to the financial status of all commercial banks and thrifts. Click “Update Report” for latest numbers. The first column is the sum of banks and thrifts. Note that the ratio of all non current loans and leases to total assets is 12.2%, and approximately 9.8% of those non current loans are fully or partially guaranteed by the US government.

Frank, I think this is very irresponsible and ask you to stop.

Hi Frank, No, it’s not 1931, and it is irresponsible to suggest that it is. What is needed to deal with this is facts - not panic.

Good morning, Jr., You were sure up late last night. Hope you get to school on time this morning. Lots of your Aunt Kitty’s smartypants friends work in mortgage, commerical and investment banking, and the banking system is intact. Yes, they’re working very late, doing interviews with papers (that have no funnies) like the Wall St. Journal telling people that we have problems, but we’ve had them before and we’ll solve them before you’re a big girl who wants to buy a house. Study your math real hard, dear, and maybe you can be one of those girls that solves the problems when you grow up, too. Love, Aunt Kitty

Hi Emcye, In the article you provide “Privatize the Profts, Socialize the Losses,” there are a few facts that require a scrutiny. The increase in FNMA/FHLMAC loan limits from $417,000 to $729,750 is made under the new (actually old) underwriting standards: 20% minimum down, 30 year mortgage. The purpose is corrected characterized as being most relevant in the California/New York markets, but I don’t understand the negativity in the comment. “Besides, how many people are going to plunk down $700,000 for a home in a falling market? That same MacMansion might dip to $625,000 by the end of the year. No one wants to take a bath like that” seems to imply that there is no bottom in this market, and the largest loans should be completely unavailable regardless of the care taken to underwrite them. “The government needs to stop meddling in the markets and let home prices return to the mean. Then the buyers will reappear” is fine, but when the buyers appear, why this author believes that loans backed by FNMA/FHLMAC should NOT be availabe to them is counterintuitive. The bail-out for FNMA/FHLMAC were the loans - not the stockholders - and they were correctly characterized as buying low doc loans in 2007 when that is what was being made by banks. The author’s assumption seems to be that all these loans are bad. They are not. Under government supervision, transparency; i.e., ascertaining which loans are bad, which can be worked out and which are fine, will be effected. That in itself will help stabilize both lenders and financial markets. I scarcely know what the appropriate way to reply to “Chuck.” It sounds as if he has no knowledge of how GSEs work. Suffice it to say that Howard Milstein’s proposal offers to provide a way to as many of the sub-prime mortgages as possible in order to stabilize the mortgage market. Banks are taking losses. They are not all “brandy swillers.” Many, some of whom are my dearest friends, are ethical, hard-working, competent people who provide a means to finance the purchase of homes. Half-truths and name calling cause panic to people who don’t fully understand this problem, and that panic exacerbates the problem. If you turn on CNBC this morning, you will hear reliable financial journalists who have been on top of this story since its inception tell you the same thing. Larry Summers also predicted trouble for FNMA and FLHMAC back in 1999. Dr. Summers was the Treasury Secretary for the Clinton Administration, the President of Harvard University and is currently an economic advisor to Senator Obama. Rather than listening to “Chuck,” why not see what he has to say?