As Joe Weisenthal notes, the idea that there’s “no market” for the mountains of crap the big banks have piled on their balance sheets is a crock. There is absolutely a market. It’s just a market that produces a price that the banks don’t want to accept.
Sound familiar? It should. Millions of American homeowners are telling themselves the same story. It’s not that their houses are only worth 50% of what they paid for them. It’s that there’s a “liquidity crisis” and buyers can’t the financing necessary to pay 125%.
So it’s time we had a more accurate definition of “bad asset.” Here it is:
A “bad asset” is an asset that is worth less than the owner says it’s worth.
Which is to say, most assets these days.
The problem for our banks is not that they own assets that are worth pennies on the dollar. It’s that the banks are still claiming the assets are worth, say, 80 cents on the dollar. It’s the difference between the claimed value and the actual value that makes the asset “bad.”
(In fact, for a potential buyer with cash, some of these assets could prove to be quite “good.” As long as the banks are forced to sell them for what they’re actually worth.)