Bad Banks Revisited

The rumors are amounting nearly as much as the excitement.  This morning at 11:00AM Treasury Secretary Timothy Geithner will unveil a plan that will involve a revised version of the bad bank program first put together and gained Wall Street buzz last week.  This being the morning of the announcement there is still a lot of rumor surrounding but as of now, here is what I have read regarding the plan:

 

Bad Assets are going to be for sale  I invite you to read my article that explains bad banks so you have a better understanding of these bad assets but the good news is that they are going up for sale.  I think this is an interesting story because one of the stumbling blocks in this program has been that government officials have not believed that these assets would be of any value to private investors.  On Wall Street, there are many private firms who state that they would buy these assets.  Once these bad assets find their way to the open market, the price will be set.

 

Struggling Homeowners Will Get Help-  Although not clear as of now, numbers of 50 to 100 Billion dollars will be spent to fend off foreclosures.  This is welcome news for the many homeowners who have been struggling to pay for a home that has a mortgage that is higher than it’s worth on the market.  This is what is commonly called, “upside down.”

 

TALF Expanded– This program is a Federal Reserve program worth up to 200 Billion Dollars that seeks to encourage private investors to buy consumer-credit backed debt.  That’s a big word for credit card loans, car loans, and student loans.  Some believe that this could be the next big crisis after the current mortgage crisis which is one reason why TALF was born.

 

Once the program is unveiled, we will break it down.

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