Word: sells
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Will every financial institution that holds mortgage-backed securities be able to sell them to the federal government? Who determines what will be bought and from whom? Will institutions be able to recover losses they have already written off? In theory anybody could sell to the TARP (troubled asset relief program). The what and from whom would ultimately be up to the discretion of the Treasury Secretary. And if institutions were able to sell securities for more than they valued them at on their balance sheets, sure, they could reverse some losses...
What is to stop speculators from buying up these bastardized securities for pennies on the dollar anticipating enormous profit when the government buys them at higher rates? The current owners of those securities aren't going to want to sell them for pennies on the dollar if they think the government will come in soon and buy them for dimes. That said, I think Treasury would love it if there were private vulture investors bidding for mortgage assets...
...bill for Senate Republicans, described as a massive car accident in the middle of the highway. The government must clear the accident away by buying the toxic debt so that normal traffic can flow freely. One avenue will be to do a reverse auction, where banks compete to sell the Treasury their bad paper, with the Treasury choosing the lowest offers. The Treasury may also directly negotiate with companies, though no one knows exactly how that will work...
...depositors were protected; and Wachovia was sold in a deal that protected both depositors and owners of the company's bonds but left shareholders with very little - has left investors guessing about the fate of the rest of the banking world. Hardest hit in today's market sell-off were regional banks like Sovereign Bancorp and National City, perhaps because they seem too small to get special FDIC treatment...
...Goldman in 2006 to become President Bush’s treasury secretary. Paulson’s bailout plan, which seeks to raise confidence in the ailing pillars of the U.S. financial system—would give the federal government authority to buy up to $700 billion of difficult-to-sell securities. The legislation gained key support over the weekend from lawmakers on both sides of the aisle and is now expected to be passed Monday by both houses of Congress. The plan follows a slew of financial shocks in recent weeks, including the bankruptcy of Lehman Brothers, the government takeover...