Many in the finance world are saying that it would be wrong to trash CDOs
and MBSs...even swaps entirely. In fact, they say that they are essential
for the economic system to function.

In recent conversation here and elsewhere some have said that "their" loans
are not affected. If you know about banking (because I don't, but I am
trying), I have the following questions (keep pedestrian political opinions
to yourself).

1) Are there truly any banks not affected?
2) If so, they did not sell on the seconday market?
a) Wouldn't that necessitate a gigantic and therefore entirely
uncompetitive rate?
b) Wouldn't it even be negligent for a bank to *not* sell on the
secondary market? I mean, isn't the idea to free up capital for further
investments and thereby reduce the rate (by making more money elsewhere)?

(This is different than those institutions who bought MBS, they were lulled
by AAA ratings from the agencies. Why would a seller (bank) not sell to the
secondary market? The buyers assume the risk ).

Even when housing was not bubbled, say 2 or 3 decades ago, loans were still
given for housing that a bank would never have given as personal loans. A
40K loan in 1970 would be given to people that would never get a personal
loan for half, a quarter or an eight of that. Wasn't that a micro version
of today's issues? That you can loan money for mortgages to people in
America safely because the value will *always* go up?

Has it been ever thus?

Thanks for the smarts!