Friday, January 16, 2009

FED to think of Forming a Bad Bank

It seems that the FED is trying to pull out all the stops to get credit moving again. This one sounds nuts but it just might work.

Today’s remarks come days before President-elect Barack Obama takes office, and signal a readiness among regulators to undertake what’s likely to be the most radical effort yet to unfreeze lending. Fed Chairman Ben S. Bernanke earlier this week urged a “comprehensive plan” to address illiquid assets, floating the idea of a “bad bank.”

I guess this bad bank would be one massive ball of crappy assets that the good banks have shed from their balance sheets. It sounds like the financial version of Anti-virus quarantine. It sounds like an interesting idea as long as the government doesn't lose a chunk of money trying to hold onto these things.

No comments: