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Technology Stocks : Semi-Equips - Buy when BLOOD is running in the streets! -- Ignore unavailable to you. Want to Upgrade?

To: Clarksterh who wrote (6065)	6/28/1998 6:59:00 PM
From: Ramsey Su	Respond to of 10921

The Japanese banking crisis is quite different from the US S&L version. Whereas the US bad debts were almost entirely real estate, some junk bonds and a little Charles Keating type losses, the Japanese is a full portfolio of anything and everything to do with debt. These include commercial loans, loans to foreign corporations, loans to buddies etc etc. This is the equivalent of having an S&L and Bank failure at the same time. In a simplified example, lets say the RTC is going to close a S&L. The liabilities are the deposits so they fork out, say, $1 billion and pay off the depositors. The S&L is closed or sold/merged with a healthier S&L. The assets are cash, loans, branches, goodwill etc. Now they have to liquidate the rest. The good loan portfolio is easy. RTC simply package that and sell it in the open market. The foreclosed upon real estate are packaged and sold in bulk, in the several hundred million range per bulk (small investors were real pissed off because it is a give away to the Goldman Sachs, Bass brothers, GE caps and the select inner circle who have the money to buy this size bulks). The remaining bad debt is more of an administrative nightmare because it requires individual determination of value and strategy. In hind sight, the RTC bail out resulted in a temporary oversupply of real estate and drove down prices, which is not all that bad. It gave a lot of US companies including QCOM a chance to buy some buildings in prime areas like SD, helping them through some difficult times. It also strengthened the banking system which was suffering from way too much competition. Most of the benefits remained in the US economy. Can Japan do the same? It will be very difficult. How do you deal with a loan to "Bob" Suharto or "Susie" Kim? How do you devise and fund the bridge bank if you really don't know how much? Japan can round up all the bean counters and audit every bank, forcing them to disclose the real numbers. Can Japan risk the devastating impact of what they may find, if it is far in excess of the $500 billion or so number that everyone is kind of using now?