TARP passes, but brace yourself for the second shoe to drop

3 responses

  1. Fred says:

    Hey Mark…I guess the big question is where are the banks holding these things. The last (only?) deal we have seen was at 22 cents. If these are really at the “Bernanke Fire Sale” price, the banks may get a write up on these moves.

  2. Mark McQueen says:

    Fred

    I’m not sure that anyone outside of these institutions (other than the auditors) can know where anything is being marked. The 22 cent Merrill deal you refer to was a true firesale exit. Look at Lehman. They were holding billions of European real estate at 97.9 cents on the dollar, when some of their U.S. real estate was in the 60s. If write-ups are coming, then in some ways there is no reason for the TARP to have passed. The various institutional investors around the world could have easily bought these “packages” if they were already marked down below their intrinsic value. The TARP is being put in place as many of these assets are “no bid”, which means that whatever marks are currently in place must be true guesstimates.

    So far, we’ve seen nothing to date from Wall Street that suggests they’ve been overly conservative.

    MRM

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