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Mortgage Broker News | 21 Jun 2010, 02:07 PM Agree 0
In 2008, Spanish banks took on a large amount of homeowners’ debt in exchange for assets, or homes. While this move helped avert a massive reduction on debt, it left Spanish banks with far more homes as assets instead of loans.
  • mortgage needs | 23 Jun 2010, 03:24 AM Agree 0
    ...o sooner or later they will start to drop them.
    Governments should look at a 100% guarantee of citizen deposits, with say 90 days history ( not necessarily corporate/biz accounts because that is not so straightforward ). This means that citizens are confident that they will get their monies and hence avert any sort of runs on the banks - your biggest headache in any banking crisis. This is on the Liability side of bank Balance Sheets.
    Government should not want to bail out the Asset side of the banks' Balance Sheets because those assets will likely be inflated in any sort of asset bubble, and in a severe enough correction that inevitably follows, may lose as much as 1/3 if not more in value.
    As well, given the huge slosh of funds, it is doubtful if any government or global bank tax have any chance of bailing out all bank and investment banking assets, while also guaranteeing citizens' deposits as well - i.e. trying to bail out both sides of a deposit-taking banks' Balance Sheets as well as the Assets of investment/merchant banks' Balance Sheets is a very tall order.
    A global bank tax could become a default insurance scheme that invites moral hazard.
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