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Thursday, January 29, 2009

US to Implement Chinese-Style Toxic Asset Buy

A few years ago, the West were criticising the Chinese on this but they are now learning from what the Chinese did then...
 

US to Implement Chinese-Style Toxic Asset Buy

American lawmakers appear to have shelved the frightful idea of "nationalizing" failing banks. However, they've now settled down to discuss -- from media commentary, frantically -- a plan that mimics the experience of modern Chinese banking regulators: the creation of a "bad bank" to remove toxic assets from the system.

You may remember that the Chinese banking system was (and remains) functionally bankrupt. [This article from 2005 is worthwhile reading.]

 

Through deft financial sleight-of-hand, a satisfactory percentage of non-performing loans (NPLs) were removed to a state-controlled holding companies (AMCs), thus allowing, among other benefits, quasi-state-owned financial institutions to list on foreign stock exchanges, sporting "acceptable" NPL ratios. But NPLs continue to rise, despite Chinese statistics (read "notorious.") to the contrary. (Whom to believe?)

 

Read more: http://www.asiabizblog.com/archives/2009/01/us_to_implement.htm

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