The Bad Banks plan to start unclogging the banks balance sheets is in the talks -- and now there is so much discussion on what to pay for these bad bank assets? The banks want a "fair value" of it (which is ofcourse much higher than what the current market value is and incidentally the least amount of money loss) and the Govt doesn't want to pay a value which will cause the tax payers harm or even too low a value which would hurt the banks!
How do you value something that pretty much can't be valued in todays market? How about take the last known value (or in cases where you can value it - that value) and buy it at that value - with a caveat. If the Government makes over 20% (insert your favorite number here - but I say 20%) of profit on selling that asset, then the Banks can have a share of it. The rest of the profit goes directly into shoring up social security. The principal + 20% should go towards paying off the debt.
What do you guys think?
1 comment:
'Fair Market Value' is a stupid concept. Value is the agreed upon price between a buyer and a seller. The fairness is that if you value something at price A and the buyer values it at price B, and you can't agree, then you don't have to sell. Fairness is not inventing a mystery price that suits your needs unilaterally. Therefore, anything based on 'fair market value' is a big fail to me. If they want to get something off the books, then they can agree on a price and a profit-sharing agreement. I think that's fair. It has to be an arrangement where the government has the first crack at recouping their investment.
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