Tim Geithner's Toxic-Asset Plan: the Details

Toxic Asset Plan 101

You're missing the point of the liquidation by the bank bad mortgages and the purchase by investors partnered with the government.

Yes, the government does take most of the risk in purchasing the toxic assets from the banks at a discount and provides nearly all the funding on the purchase with investors.

But the intent is to get the poor performing mortgage assets off the books of the banks and this allows them to show a stronger balance sheet and to acquire funding from various investors (like the Saudis and Chinese) from big money on the sideslines in cash-waiting out the stock market meltdown.

Potentially the government could make a reasonable profit on the toxic assets aquired, but its likely they will want to move them back out to the private sector in a reasonablly quick manner. With low home prices, they won't make much of any profits. Therefore it should be at a slow enough pace as to not woseren the current home market that has a large amount of homes to work off.

In short the plan needs to get lending going in the banks and control the home supply to allow steady home prices for the coming years. Alot of factors that could impact this negatively, but it's a solid plan.

Ken of CO @ Apr 25, 2009 01:45:21 AM