Sunday, January 18, 2009

NY Times starts talking about buying Assets again

Several months, I expressed some reservations about the plan to recapitalize the banking industry. The idea, basically, was to give the banks a bunch of money so they would start lending, instead of doing the original plan, which was to buy up bad assets and simply remove them balance sheets.

Given the numerous difficulties this plan has been facing (namely, banks not actually lending the money that they have received), the NY Times is starting to talk about actually buying bad assets being on the table today.

Hopefully, buying away the bad assets will provide a cleansing effect, much like taking a bunch of antibiotics to cure an illness. The flip side is that we have no idea how to value these bad assets, and it doesn't punish the debtholders and stockholders of the banks anymore than they already have been. Essentially, a "give-away."

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