Reply #14: Write down - not write off [View All]

[karynnj]

The loans are there now at face value. This is just inaccurate and ENRON accounting. If they are written down to levels that are truer, many of the banks will be under water. What Kerry seemed to say is that several ways can then be used to give the government warrants or stocks for the money the government then puts in to recapitalize the banks.

This is an alternative to doing what the RTC did in the savings and loan situation. This is designed to give the government the ability to gain when those assets appreciate. (The Bad bank method is likely to give the shareholders of the banks too much and the assets assigned to the "bad bank" will be bought and will likely appreciate when the economy turns around.

Kerry in the Finance committee used exactly the reason you do for giving money directly to the states - so firefighters, teachers, police etc keep their jobs. I agree that that is the best way to make the case for money to the states - it brings home exactly what the states will do with it. (Kerry speaking that way was compelling and an oasis on a committee speaking in abstract financial terms.)