Since January 1, 2008, the FDIC has held auctions to sell 312 Commercial and Residential Real Estate Loans that were owned by the banks taken over by the FDIC.
The average sale price for each loan was 56.3 Cents on the Dollar
There were another 348 Commercial Loans that had stopped performing (paying no interest). They sold for an average of 32 Cents on the Dollar
Some loans sold for as little as .02 Cents on the Dollar
Banks are pricing this stuff at an average of 96 Cents on the Dollar. And even at that price, banks run the risk of being declared immediately insolvent.
Under the Geithner PPIP Plan, the Government assumes that this stuff is worth 84 Cents on the Dollar.
To date, there are ZERO bidders who want to participate in PPIP. Why would you risk any money where you are buying something at 84 that is worth 32 or 56 or 2?
If you are a Bank, then why would you sell at 84 when the Government lets you invent the price at 96 or higher? You know that you are insolvent the second you price this stuff at 84. Then you get fired and maybe prosecuted. So instead, you lie about the price and try and milk a few more years of comp as the CEO. Then you leave with some massive severance package and leave cleaning up the toxic waste to somebody else. They should rename TARP “Superfund II”…
These guys live in Fantasy Land. There is no way that the banks are solvent. There is no way that they will lend and there is no way that Obama has the guts to do what is right and protect the taxpayer and get the economy moving forward again.
We are stuck until these guys stop lying and start trying to fix the problem.
http://www.bloomberg.com/apps/news?pid=20601015&sid=aylbeokVZaWo&refer=munibonds
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