On Apr 6, 2009, at 6:33 PM, Ira Glazer quoted:
> Despite bank and Administration smoke-blowing to the contrary, the
> problem with the so-called toxic assets on bank balance sheets is
> NOT that
> they cannot be priced, but that banks do not like the prices on
> offer from
> willing buyers. We have read anecdotes suggesting that the gap is as
> big as
> bank valuation 90-95 cents on the dollar versus market prices of 30
> cents,
> but the typical example is bank holding price of 80 cents versus
> market of
> 30 cents.
I'm no fan of this scheme, to put it gently, but this assumes that the "market" price - based on thin trading in panic conditions - is somehow the right one. Maybe it is, maybe it isn't. Suppose in this example that if you got trading going, the price would gravitate towards 50 or 60. We don't know, but the hidden assumption of this analysis is that 30 is the right price.
Doug