WHAT+HAPPENED+DURING+THE+BAILOUT?+ASHLEYKIM

What did the US government do?

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The video explains that:
 * Illiquidity** is when you have assets that will pay off your debt, but you cannot get them immediately
 * Insolvency** is when you actually cannot pay off your debt with the assets you own because they are not worth more than your debt

At this current moment the investment banks are arguing that:
 * The CDOs that they have are **illiquid and not insolvent**
 * That the mortgages are actually worth something in the long run
 * Even though at the moment hardly anyone would pay for them on the market
 * Say the **market price for them is wrong**
 * They say that they are backed up by mortgages, which will probably be paid back in the long run, and if they are not paid back these mortgages are backed up by houses
 * Say that they are being **forced** into bankruptcy even though they have positive equity

In the bailout of the investment banks the **government** loosened the restrictions on the **federal reserve

The federal reserve is the central bank of the US, made up of taxpayer money, that helps regulate the economy ** (Turner, Rebecca "What is the US Federal Reserve? A history of the US banking system") and usually only buys collateral that has a near certain value
 * However, in order to rescue the economy the federal reserve bought the mortgages from a very large amount of investment banks
 * Furthermore they gave some money to the companies that lost out a lot from investing in these CDOs
 * This was the 'bailout' and amassed to 700 billion dollars for America only

The controversy lies in the fact that the market value of the CDOs is close to nothing - no one will buy them, and so the federal government is essentially seen as 'giving' the investment banks and other institutions money and saving them from bankruptcy.

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