"Non-recourse Loans" - Another VERY interesting term!
Basically, these loans provide free insurance against losing money!
The idea is that right now the private sector (economics speak for non-government) investors are NOT interested in risk. Therefore, to induce them, or maybe entice these investors, to buy the "toxic assets" Secretary Geithner is willing to use a government guarantee.
Now whether the whole idea is smoke and mirrors or not isn't the question. Americans REALLY want to begin feeling better!! We REALLY enjoy feeling good (we DO, REALLY!) - grin.
There are so many deriders and naysayers about right now that any action seems to produce one group of people or the other to rant.
Whether the plan will work, is the only plan needed or is just a part of the plan is NOT important. MOVING - STARTING SOMETHING IS CRUCIALLY IMPORTANT and IMMEDIATELY! So we have the Geithner plan and at least that has instilled a bit of "let's wait and see" in the markets. A VERY GOOD thing.
The key to the whole picture is the prices of the "toxic assets" - like the Brady Plan on Developing Country Debt back in the late 1980s - the whole concept revolves around getting private investors BACK into the market and WILLING to buy the "toxic assets" at a price that banks can accept. In other words, so that normal supply and demand regulates the price.
Therefore, RISKINESS needs to be lower, which is hard to imagine sometimes on these MBS and CDOs when we really do NOT know what is in them. However, THAT'S what we need to happen, the prices of "toxic assets" to recover to 60 cents on the dollar or so.
Again, back to non-recourse loans: the government is on the hook, no matter what. Trying to get investors back into the market IS a good thing. We KNOW that too much government involvement can bring excesses too large to imagine (there are always great examples in the Pentagon) - however, scam artists are right there also looking to make a quick buck too so look out! After all, that's the American capitalist way, right?!?
The idea is that right now the private sector (economics speak for non-government) investors are NOT interested in risk. Therefore, to induce them, or maybe entice these investors, to buy the "toxic assets" Secretary Geithner is willing to use a government guarantee.
Now whether the whole idea is smoke and mirrors or not isn't the question. Americans REALLY want to begin feeling better!! We REALLY enjoy feeling good (we DO, REALLY!) - grin.
There are so many deriders and naysayers about right now that any action seems to produce one group of people or the other to rant.
Whether the plan will work, is the only plan needed or is just a part of the plan is NOT important. MOVING - STARTING SOMETHING IS CRUCIALLY IMPORTANT and IMMEDIATELY! So we have the Geithner plan and at least that has instilled a bit of "let's wait and see" in the markets. A VERY GOOD thing.
The key to the whole picture is the prices of the "toxic assets" - like the Brady Plan on Developing Country Debt back in the late 1980s - the whole concept revolves around getting private investors BACK into the market and WILLING to buy the "toxic assets" at a price that banks can accept. In other words, so that normal supply and demand regulates the price.
Therefore, RISKINESS needs to be lower, which is hard to imagine sometimes on these MBS and CDOs when we really do NOT know what is in them. However, THAT'S what we need to happen, the prices of "toxic assets" to recover to 60 cents on the dollar or so.
Again, back to non-recourse loans: the government is on the hook, no matter what. Trying to get investors back into the market IS a good thing. We KNOW that too much government involvement can bring excesses too large to imagine (there are always great examples in the Pentagon) - however, scam artists are right there also looking to make a quick buck too so look out! After all, that's the American capitalist way, right?!?
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