ONLY IF YOU CAN AFFORD A COMPLETE LOSS.

[Alcibiades]

That's when you should purchase shares in any given security, according to the standard language appearing on just about every prospectus. Every prospectus contains language that says something along the lines of "don't invest in this unless you can afford to lose your total investment." They all say that, which is why no investment bank should ever be bailed out for suffering any sort of loss: these houses have stood under the legal protection of this sort of boilerplate for decades, while many of their clients have lost billions. The people who want this bailout are trying to sell it as necessary because of a completely unforeseeable macroeconomic disequilibrium. According to them, the beneficiaries of this bailout did their due diligence, and this whole scenario was a low-probability event entirely unforeseen by anyone.

Except for those who did foresee it. The very smart folks who engaged in all this, who are looking for someone to come to their rescue, were very careful in their prospectuses to make sure that they would not themselves be on the hook if their investment went south and their investors lost their shirts. When you read the prospectuses for investment in this sort of area, they read not so much as a boilerplate warning as they do an exact blueprint for the eventual collapse--except they were written not as a blueprint, but as a way for interested parties to cover their asses in the event of lawsuits.

Take, for example, the prospectus filed with the SEC on December 20, 2005 for Dividend Capital Total Realty Trust Inc., for up to $2,000,000,000 in shares at $10 a share. That's big money. Still they were open about the risks, and wrote a whole section in their prospectus titled "RISKS RELATED TO INVESTMENTS IN REAL ESTATE RELATED SECURITIES." Here are some highlights:

"Our investments in real estate related common equity securities will be subject to specific risks relating to the particular issuer of the securities and may be subject to the general risks of investing in subordinated real estate securities..... Issuers of real estate related common equity securities generally invest in real estate or real estate related assets and are subject to the inherent risks associated with real estate related investments discussed in this prospectus, including risks relating to rising interest rates."

"Our investments in real estate related preferred equity securities involve a greater risk of loss than traditional debt financing. We may invest in real estate related preferred equity securities, which involves a higher degree of risk than traditional debt financing due to a variety of factors, including that such investments are subordinate to traditional loans and are not secured by property underlying the investment. Furthermore, should the issuer default on our investment, we would only be able to proceed against the entity in which we have an interest, and not the property owned by such entity and underlying our investment. As a result, we may not recover some or all of our investment."

"The mortgage loans in which we may invest and the mortgage loans underlying the mortgage backed securities in which we may invest will be subject to delinquency, foreclosure and loss, which could result in losses to us. Commercial mortgage loans are secured by multifamily or commercial property and are subject to risks of delinquency and foreclosure and risks of loss that are greater than similar risks associated with loans made on the security of single family residential property."

"The mezzanine loans in which we may invest would involve greater risks of loss than senior loans secured by income - producing real properties."

"We may make investments in non-U.S. dollar denominated securities, which will be subject to currency rate exposure and risks associated with the uncertainty of foreign laws and markets."

"We expect a portion of our real estate related securities investments to be illiquid and we may not be able to adjust our portfolio in response to changes in economic and other conditions."

"Interest rate and related risks may cause the value of our real estate related securities investments to be reduced."

"We will incur mortgage indebtedness and other borrowings, which may increase our business risks, could hinder our ability to make distributions and could decrease the value of your investment."

Again, this was written in 2005. Folks who were able to get in on the ground floor did do fairly well: the stock, which trades under the symbol DCA, reached a high of over $16 in January of last year. On Friday it closed at $3.72.

YOU SHOULD PURCHASE SHARES ONLY IF YOU CAN AFFORD A COMPLETE LOSS.

If this applies to the average investor, why should it not apply to Morgan Stanley, Goldman Sachs, et al? Remember, whenever they tell you it's an emergency, that normal politics should not apply, that we need to do away with public debate, we need to recall not only the Iraq War, but also the Reichstag arson.

[RUMMYisFROSTED]

1. After all, it is gambling.

:think:

[soothsayer]

2. It's only gambling for us little people. If you're in control, you know exactly how to bet and when

[RUMMYisFROSTED]

4. Ah, but then it is not a bet.

Aka the "Vigorish."

[Zynx]

3. Universal sweeping, ideological statements are all well and good until a situation becomes

a little more complicated. Very large institutions have sustained massive losses that will not be made good. We are not truly bailing out these firms. Many have suffered irreversible damage and this package will not undo that.

[nebenaube]

5. then why throw good money after the bad? n/t

[Alcibiades]

7. BAILOUT.... ONLY IF YOU CAN AFFORD A COMPLETE LOSS.

That's not a sweeping ideological statement, it's financial advice, meant to be practical. What is ideological is the contention that big investment banks should be bailed out but small investors should not. The sweeping ideological statements that created this mess were made by Milton Friedman and the other fans of deregulation.

We should exercise exactly the same degree of caution in this bailout that the investment banks in question have failed to do. Can we afford a complete loss of $700 billion? As a practical matter, not an ideological one, I find it suspicious that Paulson thinks it is OK for Lehman Brothers to fail, but that Goldman Sachs must be made whole at taxpayer expense. If the fallout creates problems, let's use this money to deal with those, but let's not just throw money into a hole by buying assets that we know are worth less than the price we have been told we must pay or else. Bernanke's said that he has no crystal ball, and that he has no ability to know if the bailout will work, so why should we bother? For that kind of money, we should get guarantees.

[amandabeech]

6. I used to write prospectuses for small NASDAQ companies, and I used extreme cautionary language

on many of them. Right on the front. In bold. The SEC wouldn't pass on the adquacy of the prospectus unless that stuff was on there.

AND IT WAS ON THERE FOR A REASON!

There are lots of risky investments out there!

When I wrote that stuff, I meant it, and I could see from the financial statements that what was being sold could be worthless in 24 hours.

Folks, believe it when you see warnings on the front page of the prospectus!

Don't ever let some sharpie tell you that it doesn't mean anything.

IT DOES!

That's all you really have to know in order to keep yourself out of investment trouble.

[Alcibiades]

8. They count on no one reading any of it

And a complete ignorance of the history of asset bubbles. I used to copy-edit loan disclosures, and when I did, I did so secure in the knowledge that I could screw up with impunity, because I would be the last person to read said document closely at all.

[bvar22]

9. Bail me out NOW, or I kill this puppy!

Hahahahahaha! Booga Booga, the sky is falling!
American Taxpayer, you've been played!
We now have your children's money too!

And Impeachment, along with any accountability is still Off The Table!

[Alcibiades]

10. An excellent image & caption

Damn extortionists.

[Naturyl]

11. lol