great opportunity, page-2

Hi Brian,

I'm with you. The $700 billion rescue plan will pass the congress and eventually the US Gov will be the winner. The Fed will probably pay 40%-65% to buy back those non-performing CDOs from troubled financial institutions and then wait until the economy bounces back and house prices recover.

The US houses prices dropped approx. 10% since July 2007. Even if the house prices drop 20%-30% overall from their peak they will evetually recover and the Fed will get back their money. The Fed can afford to wait a few years.

The rescue plan will also be good for the various financial institutions as they will clear their balance sheet and be able to run their business without the hangover of non performing assets.

I can't imagine that foreign banks that bought CDOs from Fannie & Freddie will be excluded, as this will damage the US reputation internationally. That's a very sensitive point for the US.

ANZ & NAB should benefit if they are allowed to participate in the plan and be able to write back to the balance sheet a good portion of their provisions.

Even if the are not allowed to participate in the plan, I would think that the CDOs and other derivatives they hold will not carry the same risk now the Fed has stepped in and eventually their provisions will be reduced even if that takes 2-4 years.

The real debate will be what price the Fed should pay to buy back those financial products. That debate will go on for some time.

If the US avoids the recession I think that Centro will also benefit greatly from the bailout and that will also benefit the aussie banks. I couldn't resist and I also put a small wager on CNP yesterday.

Good luck

Cheers