Imagine the panic and chaos of a casino, full of patrons, on fire. That iswhat comes to mind when I think about this bailout discussion. I am not a fireman so I need some help understanding this whole bailout plan.

Major investment banks (i.e. Merrill Lynch, WaMu, etc.) have these mortgage backed securities. They have bought and are trying to sale pieces of paper that say (1) A person is buying a piece property. (2)They borrowed money using the property as collateral. (3) They plan to pay back the money they borrowed plus interest. (4) If they do not pay back the money plus interest then the owner of the mortgage can take the property (i.e. foreclose). I got that part.

Investors buy these bundles on the open market. The investors do not want these peoples' houses. No investor wants to be in the foreclosure business. They want the money from the mortgage payments that these people plan to pay for the next 30 years. (Mortgages are lasting longer than marriages... Can you say 'till death do us part'? But that's another topic for another time.)

Because investors are concerned that the mortgage payments may not come in, no one wants to buy these pieces of paper. They have become worthless pieces of paper.

According to these banks' balance sheets, however, these pieces of paper are worth billions of dollars. In reality, they are only worth what investors will pay for them on the open market. Due to the rules, these banks have to mark these assets down... to their market value... pennies on the dollar. (Ouch!)

Banks make their money however lending cash not pieces of paper. Right now, they have a lot of paper, but very little cash. The solution is to turn this paper into cash. I got that part.

They go to their cash source, the investment community. However, the investment community is not buying what they are selling... questionable paper. Where does that leave the banks? Out of cash and essentially out of
business.

I got it up to this point, but I do not see the crisis part. I do not see the need to panic. If nobody wants to buy what you are selling, in this case high-risk promises to pay; you should go out of business.

You might be saying if these banks fail then we will not have access to credit. The economic machine will grind to a halt. This is not necessarily true. Clearly people want be able to borrow as easily as possible, but if
they cannot is that a crisis? Most Americans are already overextended.

I do agree that there needs to be legitimate lending sources available for credible borrowers. Credit worthy borrowing is not the problem here. We are talking about the subprime loans made to people who should not have been borrowing money in the first place.

To make matters worse, Mr. Bush is asking the taxpayer to invest in this worthless paper. Am I missing something?

I can see putting oil in the engine to keep it running smoothly. However, if this deal goes down, we will need Vaseline, not oil. I have no problem with "bending over backwards" to keep the economy working smoothly, but the American people are being asked to "bend over forwards" to the tune of $700Billion.

I believe Americans would be willing to suspend the mark-to-market accounting rule so that banks did not have mark these assets down simply because no one wants to buy them. They bought them so they can just hold
them. Just because it's junk today does not mean investors will not buy these securities sometime in the future. It just may take a while. They need more confidence it them.

The government could however offer some form of mortgage insurance to guarantee the shaky mortgages. Now there is a bottom to the potential losses. This is what we do with student loans. This would build confidence.

Lastly, houses back these mortgages. Common sense says that these houses are not worthless. The buyer may be paying too much for the house but it is not worthless. Hence, this paper could be worth something one day.

It will however make the lending industry think twice of about loaning money to people who are not ready to borrow.

Of course, this is a political season and this is a political football. They will not do something rational. They will simply point fingers across the aisle at the other party. In the meantime, everyone else is panicking like they in a "casino on fire". Half of the people are trying to save their chips and the others are robbing the place. In the meantime, "joe q public" is stuck putting out the fire. I, personally, have no problem with watching
it burn.

In the words of that Great Ghetto Philosopher Katt Williams, "Somebody please tell me I'm missing something... I'll wait..."

Just my 20 cents!