Otimer, so they think the problems at the financial insitution is about $230 billion bucks. Note, none of this money goes into the economy, it goes to support the balance sheet of banks (those that they will keep alive) and to pay off depositors in those that will fail. The question is are they going to allow the weak one to fail and ever use those 17 trillion yens? Furthermore, these 17 trillion yens will go back as deposits into the stronger banks. That might let these banks reopen their lending windows if that injection gets them above the 8% assets level. I am not sure it will, since on the average many of the banks are not at the 4% assets ratio.
Now few points which are not clear to me, 10 trillion yens will go to buy preferred stock in financial institution with "loan guarrantees", that does not compute in my simple farmer's brain. If the banks borrow it is not capital (or preferred stock), but how else does one understand "loan guarrantees".
Now, that recapitalization project will take until March 2001, meaning until then, the stockholders in weak banks can still wake up any morning finding that they've got an empty nest egg. I am not sure how much confidence this will impart, it is like the security of playing russian roullete, is the next shot my bank?
It also looks as the "new money" is the 10 trillions in Government Bonds" redeemable upon request, the last 20 trillion yens are Government Guarantees for the DIC to borrow from BOJ. Are they saying that the DIC will be buying the preferred shares in the financial institutions? That is a little funny. What will the DIC get for their preferred status in these finacial banks?
Where are the 10 trillions in bonds coming from? New borrowing or what? The release did not say exactly who is giving the DIC those bonds. Quite confusing in my opinion, and looks a lot like smoke and mirrors. One thing seems to be sure, none of this money is going into the consumer pockets.
Mitsuzuka, do you read this thread? HOW ABOUT A NICE TAX CUT? How ABOUT REPEALLING THE RECENT SALES TAX? YOU CAN AFFORD IT. HOW ABOUT PRINTING A LITTLE MORE YENS?
Zeev |
