Wednesday, February 25, 2009

Toxic assets

If I hear one more nincompoop up there on CNBC etc. bemoaning our inability to value the toxic assets, I'm gonna puke. Assets don't have immutable values. Ever. Houses don't. Car stereos don't. Securities don't. Etc. Prices are always in flux, period.

We will never know if we overpaid or didn't, or if the banks got too much. The best thing to do is cut through the Gordian knot, use multiple valuation methodologies to establish pricing ranges, compel the banks to accept the transactions, ease compensation rules a little to keep bankers at banks, and then raise taxes on upper brackets in 2010 at the very least to the levels of the Clinton administration. Perhaps including capital gains taxes.
Sent from my Verizon Wireless BlackBerry


Anonymous said...

I got your toxic asset value: zero. A fractional share of a mortage that's in default is worth nothing. I'm sick and tired of hearing how these bankers need to be paid. 30 years ago a neurosurgeon and an investment banker coming out of Harvard made about the same amount of money. Now the banker makes 30 to 40 times as much or more. What a load of bullshit! They're not worth 30 or 40 times as much as before. There's no lending because intelligent bankers look at their balance sheets and realize they need all the federal money just to balance all the bad debt they have incurred. Now all that bad debt has been transferred from the banks to the federal government. Bravo!

Anonymous said...

Where's Waldo? Is he here?

Anonymous said...

Obviously any country that could produce enhancement cream can overcome a few toxic assets.

Steed said...

I was hoping they would come out with what they came out with but it doesn't seem the world generally is very enthusiastic. But what they're saying is, private entities should establish prices, and the feds should limit the downside (and share in the upside) just to get the party started. I think this strategy will eventually work in creating a market and allowing the banks to get their balance sheets back in shape. It's not a dramatic rescue, but I think it will be win-win in the long run, because it's based on traders using smarts to make themselves some money. I like the Obama economic policies. They have not produced splashy gung ho market responses. But maybe that's not such a bad thing. Getting back to sound financial positions will be a gradual slog.