WSJ Comments on Treasury’s “Private-Public” Plan Goal
Written March 25, 2009 at 12:15 AM EST by Danish FX
WSJ “Heard on the Street”: The goal of Treasury’s “private-public” plan is for investors to buy toxic assets from banks, but agreement on price will be difficult
- The banks will be reluctant to part with assets at prices that could potentially produce – according to cited HSBC forecasat – a 50% return
- Despite the complexity of pricing “legacy assets”, attracting a number of bids would force the banks to come up with more realistic valuations. Authorities will also be able to intervene in bidding process by confirming bidders’ valuations based on the currently performed balance sheet stress tests
- Much lower asset values could threaten insolvency for certain banks, and the Treasury will have to decide which banks will be seized and which will be bailed out.
- In the longer term, the Treasury’s plan will still be beneficial by mobilizing private sector to bid for banks’ assets
- Despite the complexity of pricing “legacy assets”, attracting a number of bids would force the banks to come up with more realistic valuations. Authorities will also be able to intervene in bidding process by confirming bidders’ valuations based on the currently performed balance sheet stress tests
- Much lower asset values could threaten insolvency for certain banks, and the Treasury will have to decide which banks will be seized and which will be bailed out.
- In the longer term, the Treasury’s plan will still be beneficial by mobilizing private sector to bid for banks’ assets
Categories: Forex News | Tags: WSJ
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