The link below has some interesting things to say about how that might work. http://www.businessspectator.com.au...-of-hope-or-terror-LHRJP?OpenDocument&src=sph
I agree. The money must be going somewhere. All the Banks are paying out big dollars - to who? Themselves? Here's another way to think of it. Say AIG holds a shitload of CDS shorts that came due. AIG doesn't pay it. The FED does. Now the Counterparties get rich off debt they don't own via FED money payouts channeled through AIG. Take another example. Citi. They sold a bunch of CDS. They don't have the cash to pay, so they tap the FED, get a loan, payout the CDS, and the Counterparties get rich from Public money channeled through CITI from the FED. Or UBS. Fannie and Freddie. Merrill. Whoever. They all had big short positions in CDS that were essentially covered by the FED. Its like a poker game where a rich dude finances all the players. Every player blows out, gets recapitalized by the Rich Guys money, then collects a nice pot from the next guy who blows out (with the Rich guys money). In the end, the total money handed out by the Rich dude is just recirculated amongst the Players in the Game. Some up more, some down more. But most everyone up, because no one was allowed to fail. And the $$$ to prevent failure is profit for the next guy who held the other side. If thats the case, why hasn't it shown up in their accounting? Perhaps Level 3 and 4 assets are written down to offset and conceal big gains realized through CDS wins? So when the market finally does recover and CDO's catch a decent bid, these banks are gonna post XXX Billion dollar profit quarters, and the Media and Politicians looking like Heros?? Every bailout injection is just more free cash on the balance sheet to throw into the "Pot", that is ultimately being spread around between the players. Its not destroyed. It can't be. Its real money. The defaulted tranches are worth only maybe 1 trillion. So where has the other 7 or 8 TRILLION Gone??!?