Word: toxically
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Dates: during 2000-2009
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...banks' resistance may be the biggest hurdle Geithner faces in his plans to rebuild the financial sector. At the height of the crisis over the winter, there were neither buyers nor sellers for the toxic assets. Saddled with the assets on their balance sheets, the banks sharply curtailed lending, threatening to throw the economy into a tailspin. The Bush and Obama Administrations poured money into the banks to allow them to restart some lending, but the toxic assets remained on the banks' books. (See five lessons from the AIG-bonus blowup...
...that point, pressure mounted from regulators, the Federal Reserve and Congress on the Financial Accounting Standards Board to loosen accounting rules so that the toxic assets' book value could be marked up to buttress the banks' balance sheets - conveniently raising the assets' potential sales price at the same time. And in late March, days before the meeting with the bank CEOs, Geithner and Obama unveiled the government subsidies for buyers, drawing big names like Blackstone and Pimco into the market to purchase the assets from the banks and resell them...
...recent report from Goldman Sachs, the firm's research analysts calculated that the best of the banking industry's toxic assets are carried on banks' books at an average of $91 (on a bond with an original $100 price). But TIME's calculations suggest that the government-subsidized buyers would pay only $70, leaving the banks with a $21 loss on each bond sold...
...Obama and Geithner may not be completely out of the woods even if they do force banks to sell their toxic assets. Some banks may be so deeply in debt that even the proceeds from the sales won't be enough to fill their capital needs. In that case, the stress tests may prove useful in another way. Geithner has only about $35 billion of TARP money left to plug the remaining holes for the 19 largest banks. After that, he has to go back to Congress for more money - at which point he'll need the stress tests...
Bank investors has been waiting to see if there is another shoe to drop in the chain of troubled earnings reports. The firms may face more write-offs of toxic assets and pressure from the deteriorating chances that consumers can pay their credit card bills, but commercial real estate may eclipse those problems as the year wears...