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Sunday, September 28, 2008

Apologies to Barney Frank

This comment may have been off target, because it appears that "insurance" is being used to refer to different things.

I meant trying to share or insure against some of the home-price decline and the default / foreclosure risks.

It appears that what is being demanded is an "insurance fund" paid by industry to the government, to "protect" the assets that the government buys.

Off hand, the second one is silly, because what is the difference between a price of $10, say, and a price of $8, with a $2 insurance reserve add-on cost? By the way, the there is a post five-year true-up if the $2 wasn't "enough". In the rub, how many institutions-in-need are going to be around to pay, one wonders...).

Whatever the case, it makes the politics of it look nicer, somehow, yes?