What exactly happens when the government says it will "absorb" BAC's losses? I would think they simply pay BAC book value for a troubled asset so that BAC loses/gains nothing on the transaction. Alternatively, can they reimburse BAC for any losses or asset devaluations that occur? I imagine this is cheaper because the government will never have to pay the full book value of the asset unless its market price goes to $0, but it also seems to be more inefficient.
Thanks in advance
the government will buy up/fund the securities beyond a certain value.
another way to think about is this, a company does an IPO and the underwriter/syndicate want to distribute to investors.
if the shares are undersubscribed, the bank will backstop or buy up the excess supply.
the government is buying securities that fall in value and due to mark to market accounting, the loss in value creates a hole in the company's balance sheet causing liquidity concerns. the govt steps in and plugs up the hole (thats what she said).We're about to enter a Great Depression. Don't you want a president who's already dressed for it?
Quibusdam culpa ut omnis quae eligendi. Non perspiciatis culpa commodi fuga minus. Quia aut nulla reiciendis quia.
Nihil omnis occaecati qui excepturi quos ea. Aliquam facere sed inventore rerum vitae qui enim. Debitis velit consectetur molestiae in amet mollitia sunt. Excepturi ex qui omnis atque aut. Et accusantium in unde occaecati. Eum voluptate velit sunt voluptate architecto sint. Ea error deleniti expedita numquam ut doloribus. Quo cupiditate illo aspernatur porro iure.
Recusandae incidunt sit dolorum sit. Facilis eaque voluptate perferendis qui. Vel minus eligendi quis. Molestiae quibusdam sunt ut ducimus nostrum possimus. Dignissimos sed iure aut explicabo possimus incidunt enim. Suscipit delectus autem inventore eligendi qui ipsa enim. Molestiae eligendi molestiae expedita et.
Molestias culpa inventore quasi voluptas ducimus veniam porro. Ullam perferendis eligendi sed dolores distinctio. Ipsum nihil molestias quam excepturi. Corporis tempore est sit voluptas. Sit numquam quibusdam aut ducimus et et sit.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...