Toxic Assets

Subject: Toxic Assets
From: Rasener
Date: 02 Apr 09 - 01:14 PM

Who the bloody hell introduced that comment.

When they say Toxic do they not mean Bad Debts?

Subject: RE: Toxic Assets
From: Rasener
Date: 02 Apr 09 - 01:15 PM

oops sorry that should have been BS

Subject: RE: Toxic Assets
From: bobad
Date: 02 Apr 09 - 01:34 PM

Bad debts or bad bets?

Subject: RE: Toxic Assets
From: Stilly River Sage
Date: 02 Apr 09 - 01:35 PM

It means these are loans that are out that have a high probability that those paying on them will default for various reasons. Perhaps everyone will make all of their payments, in which case it isn't so toxic, but the odds are very high that the conditions under which the loans were made will make it impossible for those who are paying on these mortgages to continue to pay.

This is only a tiny part of the story, but does it answer your question?

SRS

Subject: RE: Toxic Assets
From: Megan L
Date: 02 Apr 09 - 01:35 PM

I thought it meant diahoreah

Subject: RE: Toxic Assets
From: GUEST,leeneia
Date: 02 Apr 09 - 01:39 PM

A bad debt is worth nothing. A toxic asset costs even more money.

For example, a house which has been foreclosed upon represents lost house payments. But it also represents extra costs in repossessing, refurbishing and reselling it. In some cases, the home has been allowed to go into such bad condition that the lender refuses to foreclose on it. Ownership floats in limbo, and the property soon becomes slummy. And nobody knows what to do about it.

Apparently we don't have laws and procedures in place to deal with property that interested parties refuse to own.

That seems to be the theoretical part. The practical part is that these properties are in the control of people who think a screwdriver is a cocktail and have never heard of, much less used, the other kind.

Subject: RE: Toxic Assets
From: Rasener
Date: 02 Apr 09 - 01:39 PM

I just find toxic totally inappropriate.

Its a bad debt

Subject: RE: Toxic Assets
From: Rasener
Date: 02 Apr 09 - 01:44 PM

Leeneia
I know what you mean.

We had somebody opposite us that bought a new house, then trashed it and then walked away from his responsibilty, by leaving the country.
It was sold at auction and then the people that bought it for peanuts, rented it. Disgraceful.

Subject: RE: Toxic Assets
From: Q (Frank Staplin)
Date: 02 Apr 09 - 01:45 PM

Toxic assets are high-risk financial paper. In one sense they are a 'bad debt' but in a complicated way.
This explanation is a good one, from Yahoo (I have re-phrased it):

Bob borrows $200,000 at 6% interest on a house worth $275,000. The bank now has 'mortgage paper', and can sell it to get working capital to make more loans- a normal procedure.
The house loses value in a falling housing market, say down to $150,000. Bob can't pay the mortgage payments.
The bank can't sell it, so it becomes a 'toxic asset'.

If the mortgage had been sold to a large institution by Bob's bank, and that large outfit and others (RBS, Bear Stearns, etc.) had bought a bunch of similar 'paper,' then they have 'toxic assets' at a level that might require government intervention to prevent collapse of the banking and loan system.

The assets are still there, but in the present market they are worth a fraction of the original value. If the economy turns around, they may again go up in value, but almost never to the original value.

Let's hope that governments are able to put controls into banking that will prevent similar occurrences in the future.

Subject: RE: Toxic Assets
From: artbrooks
Date: 02 Apr 09 - 02:05 PM

As I see it, and my economics degree is long ago and far away, a bad debt is a loan that cannot be collected, and which may or may not have some physical collateral associated with it. For example, an uncollectable credit card balance could be a bad debt. A toxic asset is a physical entity, such as a house, that is worth significantly less than the debt it supposedly covers. It is an asset - it does have value - but it represents an immediate loss to the mortgage holder if sold.

Subject: RE: Toxic Assets
From: john f weldon
Date: 02 Apr 09 - 02:22 PM

What are you all ranting about?? The term toxic assets has been replaced by legacy assets.

Sounds like a benefit! As in, they're building a legacy waste dump behind my back yard.

Subject: RE: Toxic Assets
From: Janie
Date: 02 Apr 09 - 02:49 PM

FWIW, David Lazarus of the LA Times agrees with you, Villan. I heard him interviewed on "Marketplace" last week. http://marketplace.publicradio.org/display/web/2009/03/25/am_lazarus/.

Here is an exerpt: RENITA JABLONSKI: Wall Street ended with losses yesterday after that huge rally Monday, but some analysts say that's to be expected -- there's still a lot of fear out there. But despite that, there is some genuine optimism about the government's plan to buy toxic assets and get them off of bank balance sheets. That is, depending on who you ask.

L.A. Times business columnist David Lazarus joins us now. David, I have a feeling you're not one of those optimists -- at least when it comes to this.

DAVID LAZARUS: I've got a couple of quibbles I guess, and my first is virtually every report in the media refers to "toxic assets." And when I hear that, it's almost like we're saying that all these banks and financial institutions bought a pig in a poke. And also, look at the Obama administration, calling them legacy assets -- as if crazy old Uncle Willie sold you a house with termites and now it's a big problem. There's not a legacy here, OK, these assets, they're fine.

JABLONSKI: Well, they were fine . . .

LAZARUS: By fine, what I mean is the assets are still exactly what they were at the beginning, and that is a security -- something that you buy and sell. And the notion that the asset has suddenly turned toxic and is somehow infecting like a cancer all of Wall Street strikes me as a misnomer. Really, what we're talking about here are mortgage companies that did not do their due diligence and gave money to people who had no ability to pay it back. Then we're talking about Wall Street heavyweights that bought the securitized versions of these loans without, again, doing any due diligence. And now they're deep over their heads after making all of these bad decisions -- and we're saying it's the assets that are the problem.

JABLONSKI: All right, so what would you call the assets?

LAZARUS: I'm glad you asked me. I would call them the "Boneheaded Loan Irresponsible Mortgage Package," or "BLIMP!"

Subject: RE: Toxic Assets
From: Rasener
Date: 02 Apr 09 - 03:37 PM

LOL

Subject: RE: Toxic Assets
From: GUEST,leeneia
Date: 03 Apr 09 - 12:53 AM

I find David Lazarus's remarks disjointed and emotional. People who talk in italics are often like that.

Subject: RE: Toxic Assets
From: Janie
Date: 03 Apr 09 - 06:30 AM

Those were my italics, leeneia, to indicate I was quoting from another site.

Subject: RE: Toxic Assets
From: robomatic
Date: 03 Apr 09 - 10:11 AM

Was the Brooklyn Bridge a toxic asset?

The way they kept sellin' that thing back in the day!

Subject: RE: Toxic Assets
From: Lizzie Cornish 1
Date: 03 Apr 09 - 10:54 AM

I think part of the reason we now have Toxic Assets is because for way too long we've had Toxic Politicians, and for the most depressing reasons seem to have been prepared to put up with them.

Subject: RE: Toxic Assets
From: Q (Frank Staplin)
Date: 03 Apr 09 - 04:23 PM

On the news today, it was stated that China had so many U. S. dollars that if they tried to sell them, they would drive the value of the dollar down and end with a loss.

The dollar a 'toxic asset'?

Subject: RE: Toxic Assets
From: Ron Davies
Date: 04 Apr 09 - 01:38 PM

'verybody looks for stability. The question is if China doesn't invest in the US, what more stable investments could they find?   China itself doesn't seem very stable--even to Chinese investors.

They also make noises about replacing the dollar as an international standard--but haven't come up with a feasible alternative--acceptable to the rest of the world.





Great cartoon in the Washington Post recently:

US taxpayer in a restaurant:

Tim Geithner:   Hello, I'll be your server tonight.

Menu:

Toxic assets--with cheese
Toxic assets--over rice
Toxic assets--Teriyaki
Toxic assets--with broccoli

Etc.

Subject: RE: Toxic Assets
From: Ron Davies
Date: 04 Apr 09 - 01:39 PM

"Everybody"