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Strategies & Market Trends : 2026 TeoTwawKi ... 2032 Darkest Interregnum -- Ignore unavailable to you. Want to Upgrade?

To: TobagoJack who wrote (10573)	10/25/2006 8:42:50 PM
From: energyplay	Read Replies (1) \| Respond to of 218107

I don't know where Stratfor gets their financial history, but what China is doing by buying out the NPLs is pretty much the same as what the US Reconstruction Finance Corporation RFC - did for the S&L mess, and what Japan did to some degree. Differences is the RFC would often pay only 80 cents on the dollar of nominal value, and then the thrift regulators were in a position to force a merger with a better run (or more politically connected) bank. The bad guys get fired, RFC slowly auctions off the properties as the real estate market improves (avoiding dumping in most cases). RFC recovers most of the taxpayers money, the new bank or thrift makes better loans to people who actually intend and have the means to pay the money back, and life goes on. The banks doing IPOs have cleaned up balance sheets, they have been designated as "winners" or "survivors" by the central government, and they have foreign expertise and much more equity post IPO. They will likely be the beneficiaries of additional consolidation. I guess the Stratfor people were expecting a Russian type outcome - the whole banking system sold for 10% of actual value ?

To: TobagoJack who wrote (10573)	10/25/2006 8:52:06 PM
From: energyplay	Read Replies (1) \| Respond to of 218107

More on the NPL loans - some of these state enterprises can be turned around as unit demand increases - for steel, aluminum, etc. Employment can be reduced by attrition - retirement and workers finding better paying jobs in other sectors, an actual change of business, etc. Some time about 5 to 10 years down the road, many of these really messed up firms will be rationalized and shut down, or mergered or fixed. The social and political cost will be much less then. China just needs to keep getting lots of FDI, and have a good climate for internal reinvestment. *********************** Two bad things about reading Strafor - If you keep listening to Stratfor cry "Wolf!" what happens when if a real wolf shows up ? This negative thinking might cause you to miss an opportunity.