Tuesday, March 3, 2009

Toxic Assets

The financial crisis is creating a boom for independent analysts who are being hired by banks and investors scrambling to put a number on the value of some of the trillions of dollars of toxic assets that continue to plague the global financial system.
EDITOR’S CHOICE

One of the US government’s priorities now is tackling these assets, backed by mortgages and other consumer loans.
The creation of some form of “bad bank” that would buy them is one of the possible financial clean-up plans that is under consideration.

The valuation experts, who could play a key role in these plans, range from big accountancy firms to small start-ups that have been set up by former investment bankers.
“There are many, many people looking for some kind of independent view on the value of the toxic assets they own,” says Arturo Cifuentes, a structured finance specialist in New York. “Investors used to rely on banks and credit ratings. Both these sources have lost credibility.”
Analysts at Barclays Capital estimate that, based on the amounts of troubled assets identified in recent government bail-outs of Citigroup and Bank of America, the value of toxic assets that needs to be tackled by some kind of government plan ranges from $1,900bn to $2,800bn.
Valuation experts are being paid by banks’ boards, by investors such as large pension funds and by small university endowments and insurers to come up with some estimate as to what these assets are worth.



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