If the total face amount of sub-prime mortgages is around $1.5T, why couldn't the government just go ahead and just pay off the sub-primes? If all the sub-primes are paid off, every SIV built on top of the mortgages will be strong again. It would cost less than the government has already spent and would stabilize the SIV's. Why isn't this an option?
who said its $1.5T? and when was the last time you looked at any bank's balance sheet and knew what was going on?
Every figure I've seen estimates sub-primes to be less than $1.5T with some estimates less than a trillion. Whatever the figure, it is magnitudes less than trying to stabilize at the commercial paper level. Even if sub-primes amounted to $5T at face value, it is still significantly less than the $50T in the CDS market. Why work with the most expensive side of the crisis? You don't even have to look at a balance sheet to pay off mortgages. Give the money directly to the homeowners to pay off the mortgages in cash. SIV's turn into cash and the taxpayers spent about as much as it took to buy FNM, FRE, AIG, and all the liquidity injections.
sub-prime is only ~500B total - about 10% of that is bad. Sub-prime is not the problem. Turn off cnbc.
Never said that it was... Your numbers a little conservative. Commercial paper relies on bank balance sheets which are clouded with SIV's and CDS's. But these SIV's are dependent on mortgages being paid. If the mortgage is paid, the SIV is good, the CDS ends its term and the balance sheet is not cloudy anymore, right?