What is really happening with the banks?
An article was written by John Carney that helps to explain the nitty-gritty details behind the government’s consolidation of the banks. The article can be found here: Here Is What’s Really Wrong With Sheila Bair’s Bad Bank.
It discusses Sheila Bair and her analysis of the current situation, and delves into the details causing the disparity between the consumers’ ability to pay off debts with private interest rates versus the lower interest rates offered by the government when assets are assumed by it.
Here is an excerpt from the article:
Bair says the “bad bank” would buy troubled assets at levels above what the market could pay because the costs of financing by the government are much lower than those by private investors. This is undoubtedly true. The question is whether or not this will be as effective as Bair hopes.
The author then comments as to the effectiveness of Bair’s proposal to resolve the issue. It will be interesting to see how all of this works out! And especially with regards to those that are trying to pay off their mortgage early.