Weeeeelllll.... that depends.
If the Japanese bankers have judged the liabilities of the banks taking their deal correctly, it could be quite the bargain.
If, however, the Japanese banks are doing what Bank of America did with Countrywide Finance, the Japanese banks could find that they have to fling a lot more cash into the banks they’re propping up.
BofA didn’t plan to buy Countrywide. They bought $2B worth of CFC around $17/share. But as CFC continued to collapse due to a lack of liquidity, BofA realized that if they wanted to not simply write off the $2B, they were going to have to buy all of CFC to inject sufficient control and liquidity to keep CFC a viable investment.
If the Japanese have deep enough pockets, we’ve now seen that the idiots at the helm(s) of US banks are incompetent enough to have put their banks into a situation where their entire operation can be bought out at fire-sale prices - and the only alternative is bankruptcy, during which the price for the buy-out will only go lower.
The US banks might avoid this, if they get their heads out of their posteriors and belly up to the Fed’s discount window.
Don't they have to put up collateral when they do that? And didn't the Fed just recently lower the standards for collateral to include commercial paper?
The problem isn’t just getting cash right now. These banks are still neck deep in writedowns because they were mark to fantasying their revenue. For years, the had been originating loan products like “Option ARMS” with no documentation or stated income required. Then they turned around and booked the potential interest earned on these loans as guaranteed revenue. Many of these loans were originated for housing gamblers who didn’t have any form of collateral/income for the property they were buying as quick flip investments. The majority of the MSM has been criminally negligent in the reporting of this. They only run stories about the few people who were steered into loans or refi’s and might lose their homes because that follows their “banks are all evil and prey on the poor” line of crap.
A major correction in housing prices wasn’t even required for this meltdown, just a return to normal appreciation or flatlining for a few months. Now that housing in many markets has simply peaked, the housing gamblers have stopped making any type of payments on these exotic mortgage products, such as option arms where they could choose if they wanted to just pay interest, interest and some towards principal, or even skip paying for periods of time and the size of the loan would simply increase.
This is beyond bailout time. Its time for the major financial institutions to mark their assets to market, but they will avoid this at all costs. Or at least drag it out over a longer period of time to make things appear not as bad as they are.
BOA bought preferred convertible stock though - I don’t know much about that kind of thing, but I thought that was a “can’t lose” proposition.