Everyone agrees it would be great if toxic assets could be taken off bank balance sheets. Trouble is, no one has figured out a way to accomplish the task without wiping out the capital of the banks with the bad assets. Prices just have not been market down enough to reflect the price one would be able to get in the market for the cruddy paper.
Banks are reluctant to mark them as low as they should be because the cash flows given off by the paper suggest they should be trading at much higher prices. There in lies the problem, the spread between intrinsic worth and market price. Who eats it? Us and European officials are both dealing with the same problems and there are no easy solutions, as the Obama folks are fast figuring out.
The EU’s Almunai is on the wires talking about the need to remove toxic assets from bank balance sheets, but he has yet to offer any concrete method for making that happen in a way that does not leave banks or governments heavily exposed to future losses.
EUR/USD is edging lower in afternoon ranges as the reflation trade loses steam. Stocks are flat and commodities are a a shade lower, reversing earlier gains. The CRB is down 0.2%.