{"id":192941,"date":"2009-02-02T22:47:00","date_gmt":"2009-02-03T03:47:00","guid":{"rendered":"https:\/\/www.panix.com\/~msaroff\/40years\/2009\/02\/02\/an-interesting-perspective-on-the-big-shpile\/"},"modified":"2009-02-02T22:47:00","modified_gmt":"2009-02-03T03:47:00","slug":"an-interesting-perspective-on-the-big-shpile","status":"publish","type":"post","link":"https:\/\/www.panix.com\/~msaroff\/40years\/2009\/02\/02\/an-interesting-perspective-on-the-big-shpile\/","title":{"rendered":"An Interesting Perspective on the Big Sh%$Pile"},"content":{"rendered":"

The New York Times<\/span> has an article on how difficult it would be value the bad financial instruments that banks are holding<\/a>, and they relate the story of a bond:<\/p>\n

But getting this right will not be easy. The wild variations on the value of many bad bank assets can be seen by looking at one mortgage-backed bond recently analyzed by a division of Standard & Poor\u2019s, the credit rating agency.<\/p>\n

The financial institution that owns the bond calculates the value at 97 cents<\/span> on the dollar, or a mere 3 percent loss. But S.& P. estimates it is worth 87 cents<\/span>, based on the current loan-default rate, and could be worth 53 cents<\/span> under a bleaker situation that contemplates a doubling of defaults. But even that might be optimistic, because the bond traded recently for just 38 cents<\/span> on the dollar, reflecting the even gloomier outlook of investors.<\/p><\/blockquote>\n

(emphasis mine<\/span>)<\/p>\n

Let me make an observation here, if the financial institute thinks that this is worth 97\u00a2, and S&P thinks that it is worth 87\u00a2, then this is a top tranch of bonds. It’s the best of the best, and it most recently traded at a 62% loss<\/span>.<\/p>\n

The banks are completely insolvent, and paying them off is much more expensive than declaring them insolvent, stripping out these assets, and then holding them like the Swedes did.<\/p>\n

What’s more, if we go with Timothy “Eddie Haskell” Geithner’s “Bad Bank”, the same people<\/span> will remain in charge, and because they were bailed out, they, and their successors will leaarn nothing<\/span>, and so we will seem the same errors, over, and over, and over again.<\/p>\n

Seize the banks as insolvent. Break them up into tiny pieces which are small enough to fail, and fire the upper management and stiff the shareholders.<\/p>\n

Either that, or we can, as Ripley said in Aliens<\/span>, “We take off and nuke the entire site from orbit. It’s the only way to be sure<\/em>,” as<\/p>\n","protected":false},"excerpt":{"rendered":"

The New York Times has an article on how difficult it would be value the bad financial instruments that banks are holding, and they relate the story of a bond: But getting this right will not be easy. The wild variations on the value of many bad bank assets can be seen by looking at …<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1004],"tags":[],"class_list":["post-192941","post","type-post","status-publish","format-standard","hentry","category-finance"],"_links":{"self":[{"href":"https:\/\/www.panix.com\/~msaroff\/40years\/wp-json\/wp\/v2\/posts\/192941"}],"collection":[{"href":"https:\/\/www.panix.com\/~msaroff\/40years\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.panix.com\/~msaroff\/40years\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.panix.com\/~msaroff\/40years\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.panix.com\/~msaroff\/40years\/wp-json\/wp\/v2\/comments?post=192941"}],"version-history":[{"count":0,"href":"https:\/\/www.panix.com\/~msaroff\/40years\/wp-json\/wp\/v2\/posts\/192941\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.panix.com\/~msaroff\/40years\/wp-json\/wp\/v2\/media?parent=192941"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.panix.com\/~msaroff\/40years\/wp-json\/wp\/v2\/categories?post=192941"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.panix.com\/~msaroff\/40years\/wp-json\/wp\/v2\/tags?post=192941"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}