TTurk

Geithner's Complex Plan Won't Fix the Problem

I agree with your comment that a valuation of the assets, liabilities and equity fo the banks needs to be performed. But I doubt seriously anyone in the Fed or Treasury is capable. The CDO's represent 1000's of individual financial instruments that are in no way homogeneous. No 2 CDO's are alike. To make matters worse the valuation today is meaningless since foreclosures and real estate values will continue to worsen for at least the next 12 months. How do you factor in those potential losses today?

Then it is save to assume that probably 10 of the top 15 banks in America will have negative equity. Now what do you do? The only prudent thing to do, is take for the FDIC to take the bank over, remove the impaired assets, separate the commercial side of the business from the investment banking side of the business and then sell the two businesses. Is there enough private capital in the market willing to buy clean financial companies? Then the problem that remains is will the proceeds from the sale of the business be anywhere near the potential losses the goverment will face on the impaired assets they keep.

And where does it end. How many failed banks can the government process without injecting total fear into board rooms of every financial institution and their investors.