Wednesday, February 4, 2009

The bank's problem in one paragraph

Since the early days of the financial crisis, officials have struggled to unwind that knot. If the government buys the assets at prices that banks consider fair, the Treasury would take a huge loss when it ultimately sells the assets for much less. If, instead, the government insists on paying market prices, the banks may not survive their losses.

So if the Government pays the price that the banks have these so-called"assets" on their balance sheet, then Treasury will take a huge loss.

How then, is the pricing of these "assets" on the banks balance sheet fair?

And if the government pays the price that the markets say the assets are worth, the banks then are insolvent.

So either you the taxpayer, buy hundreds of billions of dollars of toxic assets on balance sheets, or the banks go broke.

And only in banking, can toxic assets be sold for premiums to market prices!


Anonymous said...

The Big problem I am seeing with the banks now; they want individuals with Credit Scores over 627 in order to get a car or house in Miami, FL. The people with Credit score with 5 to 6 are whom that is working and can pay their bills. When they give the loan to the people with the higher score and refuse the ones with the lower score, they will lose, because the one with the higher score in most cases has the higher paying jobs and their jobs are the first to cut leaving the lower paying folks with money to pay their bills. I did little research and 19 out of 25 people with credit score of 5 to 6 have been paying their bills for a year, without any late fees. However, the ones with credit score of 6 and up has had late payment at least 3 times for the year, and soon all the people with the high credit scores will have bad credit and the banks will suffer. The banks need to look at credit scores of 550 and up not just 650 and up if they really want to stay open. said...

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