We had what is now getting called the 20/90 Model. It had been priced at $0.90 on the dollar when in fact it is worth $0.20 on the dollar.
The real question for [financial service] is, do we get together and write this stuff down at once—collective solidarity? Or does it happen piecemeal, with the hope the Fed will cooperate?
It does not matter what The Fed does. It is not a liquidity problem, it is a solvency problem.
First it was the homebuilder and lender. The next to leave the denial stage and go into panic mode was the mortgage insurer. But who is the owner of the paper? Where does it reside? Well, with hedge funds and on the balance sheet of the finance sector.
~ Bill Laggner, Bearing Asset Management, "Armageddon Time For The Finance Sector?", Hedgefund.net, October 29, 2007