Posted by Mr. S. Fitzpatrick on April 08, 2009 at 18:26:32:
In Reply to: genuine question posted by Foley on April 08, 2009 at 10:03:58:
The structure should be as follows:-
The government will take over the debts from the various banks, in return the banks will pay, (or take a bond issued by the government), at a price equivalent to the value, (current - how it is determined is very much unsure), of the underlying security of the loan.
The government or agency will then "run with" these loans and the borrowers. The action however from what the government are saying is that this will be short term - so if interest or capital & interest cannot be paid, (which it cannot as they are toxic), then they will appoint a liquidator or repossess the security to sell to the open market, (quick sale), any loss, which there would be in this scenario, then the state will go after the customers other assets, by way of judgement. This method regardless of any valuation will lead to a substantial loss to the state initially, (claw back will take years).
They may however hold such assets for a period of years, to either develop themselves, (social housing etc.), and / or sell on at a later stage which they hope values would have increased.
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