Word: bankses
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"The government's plan is a nice thought, but it is just not going to work," says Paul Miller, who follows banks stocks at FBR Capital Markets. "None of these banks have the capital necessary to recognize these losses."
So far, much of the public reaction to the Treasury Department's plan to dislodge risky loans and poorly performing bonds from banks has been positive. After the plan was announced two weeks ago, the stock market produced one of its biggest rallies in months. At its core, the plan...
But largely overlooked is what the bailout would really cost the banks. Yes, banks would get cash for loans they can't sell without government assistance. But these same banks would also be forced to book a large accounting loss on the sale of the loans, further eroding common equity...
How big a loss the PPIP would create is still the question, and few analysts are willing to put a number on that the figure. Goldman Sachs estimates that on average banks value mortgage loans on their books at $0.91 on the dollar. That means they agree those loans are...
The problem is that $0.70 is still less than the $0.91 average banks are holding loans on their books. The Treasury Department has said that PPIP program could buy up to $1 trillion in "legacy" banks loans and other debt. That suggests banks could lose up to $210 billion on...