Thursday, March 26, 2009

Roubini's latest thoughts

Today's Nouriel Roubini update is from his Op Ed in the NY Daily News. Roubini and Richardson lay out some scary thoughts. Although they are firmly behind the Geithner plan they also provide the ultimate question to be answered...will selling toxic assets push banks over the edge? They argue that the government needs to push the banks to sell. I say, if banks are really convinced that their valuation models are reasonable (and hence a rational alternative to MTM), then let them keep the allegedly toxic assets. The irony is that if banks subject their assets to the PPIP (Public Private Investment Plan) and don't like the market price they prove the value of MTM and should therefore right down anything they are holding immediately, however if they withhold assets from the market they would seem to be legitimately supporting their model valuation approach. In other words, banks can't have their cake and eat it too...should be fun to watch.

Check out this article for more on whether banks will really sell.

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