In Washington, clamor grows for a new Federal agency to deal with bad bank debt.
Earlier this year, Spain created a so-called bad bank named Sareb to do this.
The losers in this reshuffling are the long-term debtholders who get stuck in the bad bank.
The bad bank will be like a closed-end mutual fund and can be run as such.
It isn't clear how many firms would be able or willing to participate in capitalizing the bad bank.
Regardless of the exact reason, Russians are now effectively the not so proud owners of a bad bank.
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This centralized bad bank would take the FDIC off the hook for a lot of banks' bad loans.
As a result, setting up a bad bank would entail additional capital injections.
And today's financial institutions are so interwoven that a bad bank anywhere is a threat to good banks everywhere.
The good bank will have all the remaining assets, including derivative contracts and its loan to the bad bank.
If it is false, the bad bank would default and the old shareholders would receive nothing (as they should).
"Good bank, bad bank" is a throwback to the Depression era--and to the savings-and-loan crisis of the late 1980s.
Yet new elements such as the so-called bad bank, Citi Holdings, make the reports worthy of Robert Louis Stevenson.
But remember the state still owns tens of billion of pounds of old Northern Rock mortgages, the so-called bad bank.
"We are convinced that we will be able to bring in investors interested" in the bad bank's assets, he added.
"Who's going to want to put money into brokers if it gets put into a bad bank, " Hendler said Sunday.
The U.S. Treasury is expected to give details on its bad bank plan before the G-20 meeting on April 2.
Laiki will be split into a good bank and a bad bank.
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Cautious valuations will help set a floor for property markets and make it easier for the bad bank to sell assets quickly.
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He has argued that the PPIP is superior to a bad bank, but the weight of expert opinion, as he surely knows, disagrees.
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Letting banks revalue illiquid assets might also take some of the pressure off the 'bad bank' idea that Treasury Secretary Timothy Geithner has championed.
Like a bad bank, the aim is to isolate toxic assets, encourage private money to come in and discourage banks from hoarding their capital.
The amount of new gilts it would have had to issue a couple of years ago to set up the bad bank was prohibitively great.
Fuld is also contemplating the sale of mortgage assets or spinning them off into a separate "bad bank" in which shareholders would retain an interest.
Some of those bad or near-bad bank loans would come back to life, thereby enabling banks to clean up their portfolios without destroying the economy.
Unlike Barclays which lost its CEO and other executives over the Libor scandal UBS has the advantage of having already begun its bad bank makeover.
In recent weeks, talk of a government-created "bad bank" to absorb troubled assets resurfaced as a solution, as did a government insurance program to guarantee assets.
One part ("the bad bank") will assume all the residential and commercial real-estate loans and securitized mortgages as assets, and all the long-term debt as liabilities.
While the "good bank" will be eventually sold to a third party, the "bad bank" will run down its remaining assets and will eventually be liquidated.
But a bad bank faces different problems, the most serious of which is setting a price for assets that both it and the seller can agree on.
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