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How would they restructure their assets so quickly (over the weekend) and solve their liquidity problem without the Fed? (with the banks not lending to each oth
by vlod 17y ago
How would they restructure their assets so quickly (over the weekend) and solve their liquidity problem without the Fed? (with the banks not lending to each other)
Even if a bank wanted to lend another bank money, it takes time to do a reevaluation (more than a weekend) of another banks assets and they would be more concerned of trying to calculate their own exposure.
- cwan 17y agoIt's called a cramdown: http://www.forbes.com/forbes/2008/1027/030.html http://www.forbes.com/forbes/2008/1027/030.html The idea is that there wouldn't be a liquidity problem as the debt excluding individual depositors would be restructured as equity or some type of quasi equity/debt with assets aggressively written down. The problem with what has currently been done with the bailouts is that the underlying problem hasn't be dealt with and only deferred meaning that at some point it's still going to have to be dealt with - and by taxpayers instead of investors who should bear responsibility for the risks that they have taken and the trust they placed in the executives of these institutions.