Insurance companies investing their reserves in improperly rated mortgage backed securities.
When foreclosures started to ramp up, nobody knew how much the investments were actually worth, so suddenly insurance companies were seeing their reserve money evaporate instantly.
True, but if First Republic falls, there's going to be a bank run. There's already a lot of banks losing deposits because people would rather buy bonds with higher interest rates. That's the force multiplier this time.
I'm really, really hoping, for the good of everyone, that First Republic can survive the year at least.
But that doesn't have the same potential to launch the problem into other sectors of the economy.
Agriculture, manufacturing, communications, health care, logistics, technology, and entertainment didn't care about the bankruptcies and defaults. Banks collapsing left and right was just a problem for borrowers, not businesses funded by selling equities. They barely even cared as the rating agencies like Bear Sterns imploded.
But once AIG collapsed, THEN the threat became real for the rest of the economy.
In 2008 there was a force multiplier:
Insurance companies investing their reserves in improperly rated mortgage backed securities.
When foreclosures started to ramp up, nobody knew how much the investments were actually worth, so suddenly insurance companies were seeing their reserve money evaporate instantly.
True, but if First Republic falls, there's going to be a bank run. There's already a lot of banks losing deposits because people would rather buy bonds with higher interest rates. That's the force multiplier this time.
I'm really, really hoping, for the good of everyone, that First Republic can survive the year at least.
But that doesn't have the same potential to launch the problem into other sectors of the economy.
Agriculture, manufacturing, communications, health care, logistics, technology, and entertainment didn't care about the bankruptcies and defaults. Banks collapsing left and right was just a problem for borrowers, not businesses funded by selling equities. They barely even cared as the rating agencies like Bear Sterns imploded.
But once AIG collapsed, THEN the threat became real for the rest of the economy.