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Strategies & Market Trends : Currencies and the Global Capital Markets
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To: Henry Volquardsen who wrote (929)10/25/1998 12:05:00 AM
From: TimbaBear  Read Replies (1) of 3536
 
Please excuse my intrusion....I have been a silent reader of over half of the posts on this thread and have gained considerably....however I have some confusion that I hope you can help dispel....Regarding Japan's efforts to address the banking problems, my understanding of what they are doing is that the Government will buy a bank that is insolvent (pay for the stock), absorb the bad debt, then give the remaining good accounts to some bank that is still solvent....my confusion arises in how to view this....it seems to me that the government is trying to be all things to all parties....protecting the shareholders by buying the shares, absorbing the bad debts so that the savings of the individuals are freed up to lend again, and giving other banks clean portfolios that those banks didn't have to go out and get (probably with a government guarantee against loss for some period of time( this part is just my speculation))....If my understanding of the intent is correct, doesn't this make the magnitude of loss significantly greater due to the purchase of the shares?....Won't the taking on of this amount of debt be really inflationary?....Where is the reform of the practices that led them to this point?....Will the banks be practicing "defensive underwriting" and not lend that much even though they are re-capitalized?....Again, I am sorry to intrude, I don't have the level of experience that is so evident on this thread but I hope you can help shed some light on this for me.
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