> Beth wrote: > I get that part. > > What I dont' get is what "collapsed" is specifically referring to - they > don't have enough cash to make payroll? Obviously in banking its more > complicated than that - but thats what I want to learn. >
Let's say you decide to start a business making mooseburgers and selling them on the inets. Well the first rule of starting a business is that every dollar you spend setting up is a dollar you need to earn back in revenue *just to break even*. But let's say you ignore this and secure a $10M loan to build a mooseburger plant. You're betting that people will want to buy your mooseburgers. You've bet $10M. Of a bank's money though. Ok, so let's say nobody wants to buy mooseburgers. The bank comes looking for their monthly payment and you can't make it because you have no revenue. You've "collapsed". You're incoming cash is smaller than your outgoing obligations. WaMu collapsed because their incoming monthly loan payments dropped below their monthly obligations. ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~| Adobe® ColdFusion® 8 software 8 is the most important and dramatic release to date Get the Free Trial http://ad.doubleclick.net/clk;207172674;29440083;f Archive: http://www.houseoffusion.com/groups/cf-community/message.cfm/messageid:271004 Subscription: http://www.houseoffusion.com/groups/cf-community/subscribe.cfm Unsubscribe: http://www.houseoffusion.com/cf_lists/unsubscribe.cfm?user=89.70.5
