Reply #4: Thrifts have shaky loans and sub-prime too...

[kirby]

Local thrifts also played the game of questionable appraisals and lending based on teaser rates that once they adjust the borrower will not be able to repay. To be competitive, many had to play the game.

It is called a Wall Street Bailout because the complex scheme was hatched within Wall Street. It created a new paradigm of lending where the local thrift was not as concerned about the ability of the person to repay because they knew they could eventually securitize and sell their loans. The housing bubble is the base of it, but the fancy financial instruments like credit default swaps (which Warren Buffett called a ticking time bomb 5 years ago) is the invention of Wall Street.

Banks/Thrifts lend money to one another for very short terms and even those loans are made up of AAA Commercial Paper. The rating agencies are a complete joke because that paper is not as risk free as AAA would imply.

Most banks, including Community Bankers Assoc, are really hoping for this bailout because they are hurt too.