Who Wants To Buy Toxic Assets? Plenty Of People, It Turns Out
Gary Varvel is the brilliant political cartoonist for the Indianapolis Star. His depiction of Treasury Secretary Timothy Geithner as an airline pilot trying to reassure terrified passengers about his improvisational flying skills is delicious. It gets to the point that there simply is no textbook response to the global financial crisis. This is especially true when it comes to disposing of those "toxic assets" President Obama, business leaders and reporters keep talking about.
"Toxic asset" has become economic shorthand for the bad loans at the center of this entire mess. The most damaging of the assets are mortgage-backed investments that have threatened the very survival of the world's biggest banks. Basically they are bundles of thousands of individual mortgages. At the height of the housing boom, selling these bundles of mortgages freed banks to loan even more money. Banks, Wall Street firms and hedge funds also bought these securities as investments. But the assets have lost their value as homeowners defaulted on the mortgages, foreclosures increased and home prices dropped.
The plummeting value of the mortgage-backed investments, and other securities built around loans, has forced banks to dramatically cut back on their lending to each other, businesses and consumers. The recession will only deepen unless the banks can eventually get rid of the "toxic assets" still on their books.
"Toxic asset" has become economic shorthand for the bad loans at the center of this entire mess. The most damaging of the assets are mortgage-backed investments that have threatened the very survival of the world's biggest banks. Basically they are bundles of thousands of individual mortgages. At the height of the housing boom, selling these bundles of mortgages freed banks to loan even more money. Banks, Wall Street firms and hedge funds also bought these securities as investments. But the assets have lost their value as homeowners defaulted on the mortgages, foreclosures increased and home prices dropped.
The plummeting value of the mortgage-backed investments, and other securities built around loans, has forced banks to dramatically cut back on their lending to each other, businesses and consumers. The recession will only deepen unless the banks can eventually get rid of the "toxic assets" still on their books.
How gold pays for 