Do you think the sub prime market is affecting banks willingness to lend to one another?
As you probably know, all those sub-prime mortgages were consolidated and then parceled out to investors around the world, including banks. At that time, it seemed that nobody cared anything about investment risk, only about getting a little highter yield. Today, these things are not really trading on an open market, and their value is being propped up in various ways, including what is called “mark to model”, i.e. an imaginary price. Without a true open market, their value is very much in question. Nobody wans them. Banks are trying to detoxify these “assets” and also hide them off balance sheet in SIVs (“Special Purpose Investment Vehicles”). But this makes other banks nervous, since large slices of debt are cast somewhat in doubt by these games. Depending on how it plays out, some banks could go under. Therefore, other banks are concerned that maybe they are lending money to a bank that is holding the Old Maid and will go under without paying them back. Imagine lending money to a bu
Related Questions
- Market turmoil makes me nervous. Whats the banking system – the federally regulated banks you mentioned – doing about it?
- What prompted American Express to think of venturing into retail banking despite such depressed market conditions?
- Do you think the sub prime market is affecting banks willingness to lend to one another?
