Banks have noted that more than 90% of all homeowners currently are on their mortgages. While they argue
that their assets will ultimately perform, the discounted prices being offered by investors do not
thus reflect the real worth of these investments. In addition, recognizing the assets at a lower value may
leave them worse off than if they do not sell out and make them potentially insolvent. Government-backed financing
seems to be a sweetener but it is likely the banks will remain reluctant until they are offered a price that
matches or exceeds the value recorded in their books. FDIC chairman, Sheila Bair however lamented that
the banks will have to take the hit if they are to survive. There is no incentive for banks to participate.

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Posted by Shue on April 23rd, 2009 :: Filed under Uncategorized
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