Saturday, September 20, 2008

Flat bailout plan: Some numbers

OK, let's say we have 10 million non-millionaire investors in this country who have maxed out the full $100K of losses 10^7 * 10^5 is 10^12, the same order of magnitude as the current bailout. This depends of course on the structure of investing in this country (how many people will lose $100,000+ ?), and requires a method to pass the losses fairly through individual pension plans and mutual funds.

This is just a matter of bean counting though, and a far easier task than pricing derivatives correctly, which the Paulson plan requires. That is a task that appears on its face to be impossible. Possibly by design.

OK, let's make part of the flat bailout in federally backed tuition loan guarantees at the current prime. Another $50K each? Not everyone will or can use these, so it might not be so expensive.

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