You thought they were all rotten already. But no. Rather like the monolines, the banks are clamouring to emphasise that their business falls into two pots - good and bad.
The FT reports that Wall St may look to follow the example of UBS and hive off the illiquid, troublesome securities linked to US mortgages. The euphoric share price response to UBSâs announcement earlier this week may of course have had something to do with their thinking.
As far as we can see the UBS move makes for good PR, draws some line (albeit psychological rather than in terms of potential writedowns) under the toxic nasties, and possibly sets the way for further options, such as a sale or partial sale to a bargain-hunting investor, or a alternate shift of this waste from the balance sheet.
But thereâs no magic wand here. As Yves Smith points out youâre still going to have knock the stuff down to a value where some chump is interested in taking it off your hands. So massive though the UBS writedowns were, and market response aside, thereâs no guarantee that there wonât be more. In fact, to flog these assets theyâll almost certainly have to be more.
The intention here, notes Smith, seems rather to engineer a way of dumping the troublesome securities onto the public sector. The FT story adds:
According to people familiar with the matter, banks are discussing a joint proposal to regulators to set up a fund, which would absorb US subprime assets and other troubled securities, as a way of restoring confidence in the banking system and ending the pressure to recognise mark-to-market losses.
In the wake of Bear Stearns, momentum is gathering behind the idea of the Fed, or central banks generally, acting as buyers of last resort. But the idea of buying up MBS to save the big banks looks very much like giving money to Wall St rather than struggling homeowners, adds Felix Salmon: the optics (read PR) are terrible.
Any fund, regulatory-backed or otherwise, would likely be impaled on the same spikes that did for the ill-fated super-SIV, namely getting the banks to agree on terms and scope for the fund, and in particular, how assets moved into the non-SIV SIV would be valued.
In the meantime, the âopticsâ of having another solutions to bat around can only be positive.
http://ftalphaville.ft.com/blog/2008/04/03/12031/can-you-make-a-bad-bank/
http://www.ft.com/cms/s/0/7f7dc986-00dd-11dd-a0c5-000077b07658.html
The FT reports that Wall St may look to follow the example of UBS and hive off the illiquid, troublesome securities linked to US mortgages. The euphoric share price response to UBSâs announcement earlier this week may of course have had something to do with their thinking.
As far as we can see the UBS move makes for good PR, draws some line (albeit psychological rather than in terms of potential writedowns) under the toxic nasties, and possibly sets the way for further options, such as a sale or partial sale to a bargain-hunting investor, or a alternate shift of this waste from the balance sheet.
But thereâs no magic wand here. As Yves Smith points out youâre still going to have knock the stuff down to a value where some chump is interested in taking it off your hands. So massive though the UBS writedowns were, and market response aside, thereâs no guarantee that there wonât be more. In fact, to flog these assets theyâll almost certainly have to be more.
The intention here, notes Smith, seems rather to engineer a way of dumping the troublesome securities onto the public sector. The FT story adds:
According to people familiar with the matter, banks are discussing a joint proposal to regulators to set up a fund, which would absorb US subprime assets and other troubled securities, as a way of restoring confidence in the banking system and ending the pressure to recognise mark-to-market losses.
In the wake of Bear Stearns, momentum is gathering behind the idea of the Fed, or central banks generally, acting as buyers of last resort. But the idea of buying up MBS to save the big banks looks very much like giving money to Wall St rather than struggling homeowners, adds Felix Salmon: the optics (read PR) are terrible.
Any fund, regulatory-backed or otherwise, would likely be impaled on the same spikes that did for the ill-fated super-SIV, namely getting the banks to agree on terms and scope for the fund, and in particular, how assets moved into the non-SIV SIV would be valued.
In the meantime, the âopticsâ of having another solutions to bat around can only be positive.
http://ftalphaville.ft.com/blog/2008/04/03/12031/can-you-make-a-bad-bank/
http://www.ft.com/cms/s/0/7f7dc986-00dd-11dd-a0c5-000077b07658.html
