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September 07, 2010 at 08:00 PM
TARP was a way to at best allow these securities to normalize somewhat, potentially allowing the underlying mortgages to come back to closer to normal, and for holders to earn their way out of these securities over time–or at least mitigating the havoc that might be caused by valuing these securities at what they are really worth.
In an August 31 editorial in The Wall Street Journal, “TARP and the Continuing Problem of Toxic Assets,” author Andy Kessler reminds us that we are far from out of the woods, so to speak. The trouble with mark-to-imagination or as Kessler calls it, “mark to wish,” is that it makes it next to impossible to accurately value financial services firms for investment, and hard o believe that the ratings of insurers or banks or brokers who hold this paper are accurate. How can one invest in these firms or advise a client to use a particular insurer if that is the case?
The housing crisis remains in the forefront of the continuing crisis and none of the measures that have been attempted so far have had a real impact on the overhanging inventory of homes Until the backlog of foreclosed homes, and those delinquent but not in foreclosure, is cleared (many say this will take years), it will be difficult to have a sustained period of real growth or recovery.
Kessler suggests three potential solutions: “quantitative easing” for “toxic assets,” or “QE toxic” as he calls it–a Fed buying program for those assets in which they–and by extension WE would hold these assets until they are worked out one way or another.
