The situation today with the financial markets reminds me of the Seinfeld show episode about rental cars. When Jerry and Elaine arrive at the rental counter, the agent informs them that she has their reservation but, unfortunately, there are no more cars. She insists that the rental company has not failed in its duty.
Jerry corrects her: “See, you know how to take the reservation, you just don't know how to *hold* the reservation and that's really the most important part of the reservation, the holding. Anybody can just take them.”
The proliferation of new investment vehicles like credit default swaps and auction rate securities increased the credit supply. That was undoubtedly good news for many individuals, families, businesses, and state and local governments. The problem was that many on Wall Street forgot about the most important part of taking a bet, the honoring of it. Sometimes you actually have to pay up.
It turns out that many of these promises were, like Seinfeld, about nothing.
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