Filing for bankruptcy

[A HERETIC I AM]

2. The way I understand it, it's a "Write Down"

The actual money they were given with which they bought the house and everything else came from the sale of bonds.

Those bonds and billions of dollars worth of others were written down (not "off) such that their Par Value of $1000 a piece settled or will settle for, in some cases pennies on the dollar, if not default to zero.

The losers in that scenario were those individuals, mutual funds, pension funds, banks etc. that bought the bonds. That's where the debt was "absorbed" as you put it. They bought bonds they anticipated would pay interest for a specific length of time and at the end of that time they would get their initial investment back.

The result of this all was in part good and in part, bad.

The good is that lenders tightened requirements back to where they should be and as a result the quality of bonds issued in this sleeve are able to properly earn and be given better (higher) credit ratings.

The bad is that now it is much more difficult for many millions of Americans to get a mortgage and other high end credit.