It was an odd transaction — in theory, the bondholders should have been senior to the counterparties of the swap contracts.

The Wachovia shareholders weren’t totally wiped out (they got a fractional share of Wells Fargo), so I imagine the debt holders were made whole.

MrRFox, wow what a re-writing of history. Shame Stalin is dead.

BSC didn’t get “tens of billions” in guarantees. A collection of assets JPM didn’t want got put in a SPV and JPM agreed to take the first billion hit. It is currently making a profit for the US taxpayer.

LEH went bankrupt. The Fed acted as it should as lender of last resort, lending at above market rates against collateral with the appropriate haircut. These operations made billions of dollars for the taxpayer.

The “aid” you are complaining about has to date returned tens of billions of dollars in cash profit to the taxpayer. Maybe you are confusing banks with auto firms?

I refer you to how everyone who criticises Paulson et al always have to resort to lying.

That illiquidity had an impact on asset values, which did – or would have shortly – rendered all of them insolvent in the equity sense. From both angles, the entire industry was facing imminent destruction and was helpless to help itself. Its very survival was dependent of government aid – and that was the moment to act.

At that time, the entire industry could have been legally compelled to reform, and be restructured in a way that was both equitable and best for the society as a whole. Needless to say, the Wall Street types running the government wanted none of that for their (temporarily) former firms. What we got instead was a (temporary) solution that punishes everyone except those most responsible for creating the mess. Those guys came out it just fine. Not surprising – they owned the guys who made the decisions.

Soon, the opportunity to correct that mistake will likely be offered to us. Best that we not pass it up a second time.

Any idea how much of a hit the FDIC took on that one?

TFF, Wachovia was seized by FDIC and sold on, from recollection they used some quirk to avoid the normal FDIC process. Interesting little side-note, they were bankrupted by a purchase of a bank which made billions for the people who fund Jesse Eisenger….

Still, you have to admit that huge fortunes were made in banking/finance during the real estate bubble. You haven’t shared details of your own history, but I suspect you were part of that.

Minor quibble — Wachovia was pushed into the arms of Wells Fargo, and while there were some public guarantees against losses (did they ever materialize?) they were never a ward of the state in the same way that Fannie/Freddie, AIG, and Citicorp were.

Quite so, no need to rush. Now is the the time to do what was not done over Lehman Weekend – think the matter through and plan an effective and ethical actual solution to the matter.

Wonder how much time there really is though – the focus now is on keeping things from falling apart before the election. Once that’s out of the way ….

What institutions would that be? AIG? taken under public ownership. Frannie? ditto. Wachovia? ditto. Also what is insolvent in the “equity sense”? Why do you insist on bandying about words whose meaning you clearly don’t understand?

But give it another six months or a year, and your crisis situation could create itself… Then we can consider an appropriate response.

Good. That provides the legal and ethical justification to now correct the error originally made during Lehman Weekend – using taxpayer funds (in any manner) to rescue financial institutions then and there “insolvent” in either or both the equity sense or the cash flow sense, and who became so by reason of their own misconduct, and without first placing the institutions under temporary public ownership.

Do you really think the middle class could outbid Wall Street – or should have to? Which raises the philosophical question – Is violence always wrong?