Remember that in Treasury-speak, "legacy" is the word for toxic, and the program, which was to be run by the FDIC, could not get the banks to sell the loans.
According to FDIC chairman Sheila Bair, "Banks have been able to raise capital without having to sell bad assets through the L.L.P., which reflects renewed investor confidence in our banking system," which actually makes no sense.
If they can sell the assets at a higher price because of federal guarantees, and the federal guarantees amounted to a subsidy of over 50%, which meant much higher prices than they would get otherwise, they would, except for one little thing:
Many banks have refused to sell their loans, in part because doing so would force them to mark down the value of those loans and book big losses. Even though the government was prepared to prop up prices by offering cheap financing to investors, the prices that banks were demanding have remained far higher than the prices that investors were willing to pay.(emphasis mine)
The translation here is that if they sold their pieces of the big sh%$ pile, even with the government subsidy, they would lose so much water that it would be impossible not to recognize that the institutions were insolvent.
Basically, because of the dishonestly optimistic "stress tests," and the banks strong-arming a change in mark to market rules by the Federal Accounting Standards Board, they can now, once again, hold this on their books at fictitious values, and so can pretend to be solvent, and go back to overpaying their incompetent senior executives.
Heck of a job, Timmy.
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