Posted on 03/25/2009 12:31:02 AM PDT by TigerLikesRooster
US banks face big writedowns in toxic asset plan
By Francesco Guerrera in New York and Krishna Guha in Washington
Published: March 24 2009 23:31 | Last updated: March 24 2009 23:31
The government’s toxic assets plan will force banks such as Citigroup, Bank of America and Wells Fargo to take large writedowns on their loans, requiring them to raise more capital from taxpayers or investors, executives and analysts have warned.
Senior bankers say the authorities’ latest drive, announced on Monday, to cleanse financial groups’ balance sheets by encouraging investors to buy troubled residential and commercial mortgages will prompt banks to record losses on those portfolios.
The government will also use its “stress tests” to force banks to take more aggressive provisions on these loans, creating a stronger incentive to sell. This process will increase the pressure on banks that have large loan portfolios to raise fresh funds from investors or the government if capital markets remain frozen.
The possibility of further government injections is set to weigh on banks such as Citi, in which the authorities are about to buy a 36 per cent stake, BofA, Wells and other recipients of federal aid.
(Excerpt) Read more at ft.com ...
Ping!
Another fly in the ointment.
What does this do for the “chain of custody” of the slices of mortgages ,, I’m assuming the vast majority of “rights” to income streams were never recorded due to complexity in determining what is owned or the cost to do the proper paperwork...
The unraveling of the “slices” looks like a dream job for the forensic folks. Bill by the hour and collect up front.
Triple-short-financials, FAZ, is about $19. Two weeks ago it was $100. I’m loading up with the full expectation that it will be there again by summer.
Thanks for the ping.
In a real market economy, wouldn’t new banks start up to fill the market need for banks with clean balance sheets? Wouldn’t these poisoned banks fail as a result of the toxic loans and other bad assets they are carrying?
Why aren’t we letting the market work by letting the over-leveraged banks fail and let new banks start up with clean capital assets and new portfolios of loans?
Who are we protecting here?
Who are we protecting here?
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Our Trillions are buying a year (at most) and a golden parachute for connected Wall St. Rats..
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