Sense on Cents

Will banks sell toxic assets? This question is being asked ad nauseum. Investors have indicated a willingness to purchase at the right price. That price has moved up somewhat given the assistance of government financing (read this as taxpayer financing) and government assumption of losses (read this as taxpayer assumption of losses). Bank executives have indicated a willingness to sell, “at the right price.” Ken Lewis, CEO of Bank of America, made that assertion again this morning. 

What’s the right price? Well, a Bloomberg survey of investors and banks provided indicated levels of interest as to what the right price for certain of these toxic assets might be. Investors are willing to pay 32 cents on the dollar. Banks are willing to sell at 84 cents on the dollar. In Wall street parlance, between those levels one can drive many Mack trucks!!

Aside from the disparity in perceived value, banks now are further incentivized not to sell given the reprieve they received just yesterday in the relaxation of the mark to market.  (more…)