From the New York Times by James Chanos.
There are plenty of buyers (including me) for “distressed assets,” at the right price. We may reasonably argue if a certain C.D.O. [collateralized debt obligation] is worth 25 or 30 cents on the dollar, but I have no interest when the bank showing me the same paper at 60, could “do the deal” at 55…! The illiquidity is due to the continued overpricing of this paper, not the paper itself.
Let me see if I get this. We’re having a credit liquidity crisis (see this). Banks are claiming they have all these “distressed” assets that keep them from issuing any credit. There are plenty of buyers of these “distressed” assets AT MARKET PRICES. Banks don’t want to sell at market value. Banks ask government to buy “distressed” assets from them AT THE PRICE THEY PAID.
Wow. Can I get the government to buy my worthless stuff at the price I paid? I’ve got tons of old computers just sitting around collecting dust.
Tags: bailout mark-to-market
October 1, 2008 at 8:50 pm |
There are no market prices. There is no market. That is the whole point.
The banks so far have written down around $550 billion. At the current marks, those banks that can fund their positions are willing to sit on them. Those that cannot fund their positions go bankrupt. But either way, they’re not going to lend.
October 2, 2008 at 3:26 am |
Thanks Jim. How are things at UBS in Stamford?
Don’t get me wrong. I’m not opposed to *a* bailout. Quite the contrary, you are correct, banks won’t lend with some sort of cash infusion. I’m more concerned with the specifics of *this* bailout.
Anyway, all of this will be moot by Friday.