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Round 3 for AIG and Citi?

Via Mark MacKenzie Real Estate Planning:

If the size and scope of the current financial crisis was at all uncertain or ever in doubt, the past couple of days of news headlines should have made things very clear, we are going to need a bigger boat.

There are two major breath-taking headlines that should have caught your attention.

First, AIG, which according to CNBC's David Faber, has already received $150 billion in loans from the government which already owns 80% of the now defunct insurance company, is looking for a third loan from the government in order to "keep operating after next Monday, when it will report the largest loss in U.S. corporate history."  The losses are estimated to be in excess of $60 billion for the quarter.

The second headline is the debate over whether Bank of America or more possibly Citi will be nationalized.  Citi is also said to be in need of a third capital injection in addition to the $45 billion they have already received.

How many more times are we going to have to do this?

The answer, unfortunately, is that if this were a race, we are closer to the start line than the finish line.

And the reason this is the case is that there are more foreclosures projected than have already taken place.  And no, Obama's housing plan is not the solution.  In fact, Credit Suisse is predicting an additional 8 million foreclosures over the next four years.  What this means is that all of these major banks that have invested in mortgage backed securities and credit default swaps will continue to be exposed to the systemic risk that is associated with them based on the ongoing deterioration in the housing market. 

Until the housing market can pull out of this free fall, Wall St. and Main St. bailouts will become America's favorite past time.  Unfortunately, neither of these types of bailouts has shown to have any impact on actually growing the economy, increasing consumer confidence, or creating jobs.  It's the housing market, stupid.