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Banks And Market Value

Banks And Market Value

Regarding this issue, the Treasury secretary, Timothy Geithner, has given three options being considering: value as the market is valuing similar assets using valuation models used by independent firms or seek a review by financial supervisors. to consider the valuation methodology and its relationship to the true market value of toxic assets, identifies two options for this type of bad bank: the bad and the good bank bad bank evil. The first alternative is to generate lower costs and is more aligned with the goals of searching prudent behavior by financial institutions against risk. This variant is that the bad bank acquires the assets to their market value forcing banks to write off those assets and clean up their balance sheets. The resulting, those found to be insolvent banks are recapitalized, nationalized or liquidated by the State.

a In the variant of bad bank bad, the bad bank would buy the toxic assets at inflated prices (above market value) so that banks can start as soon as possible to provide money again. This alternative appears to be attractive to governments and to accelerate the recovery of the economies (to revive the credit channel), but would generate perverse incentives for banks in the future also involve a higher tax cost (and even by big questions of the population). a On these alternatives, in the view of David Roche, who has been for many years chief strategist at Morgan Stanley and now president of his independent firm: If the solution is not taken of the good bank bad, the system will remain as corrupt as before . Wells Fargo Bank: the source for more info.