ShockediSay
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Wed Feb-04-09 10:05 PM
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Toxic Asset Valuation - Piece of Cake |
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>Banks wishing to unload ‘toxic assets’ volunteer these assets to the federal government for financial assistance.
>The federal government, in turn, buys these assets at some nominal discount, say 5 or 10 per cent (the discount is justified by the very fact that they are volunteered for toxic asset treatment).
>The federal government pays for these assets over time with interest.
>If the ‘toxic asset’ declines in value the federal government can periodically reduce the amount it must pay the bank over the life of the installment purchase. >>In asset based commercial finance circles, this is most commonly referenced as debt ‘with recourse’ although there is a twist here.
>The bank now books the installment sale price of the toxic asset as a government obligation asset (subject to the contingency of recourse reduction by the federal government.) >>a)This improves the balance sheet of the bank, b)the bank is not underpaid, c)any recourse write-downs occur gradually/periodically, d)I the taxpayer do not overpay and e)instead of having to print money, the government is effectively borrowing money from the bank via the installment sale/payment over time.
>Since the federal government will inevitably come to own defaulted mortgages, it will f) be in a position to refinance defaulting ‘good’ borrowers.
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Double T
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Wed Feb-04-09 10:30 PM
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1. Toxic Asset Value = Zero, Nichts, Nada. |
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How many GD ways do we have to say it?
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knowbody0
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Wed Feb-04-09 10:40 PM
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DJ13
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Wed Feb-04-09 10:42 PM
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3. Those derivatives arent worth more than .15 to .20 on the dollar |
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Lehman sold a bunch before they went under last year for .15 per $1.
The articles coming out talking about the government buying them for the bargain price of .60 or more are pro- banking industry puff pieces.
The banks dont want to sell them for their true value, so they are mounting a PR campaign to try and get us taxpayers to buy them at 4x their value.
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DU
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Thu Apr 25th 2024, 09:52 PM
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