vaughn

Credit Crisis Watch: Signs of Progress?

Dude, why would banks lend out money when they can use the money to buy back their own debts at a huge discount, say 70 c on the dollar, which will produce instant profit of 30c, much much better than loan the money out, take the default risk and only earn a pittance spread of, say, 2.7%?

The more banks deleverage via redemption of their own debts, the better the capital ratio in their balance sheet, more profits shown on their income statement, and easier life for their CEOs.