Good Bank - Bad Bank
What a turbulent three weeks of the New Year it has been! It began with the hope that major stock markets around the world (led by the US Dow Jones Index), were beginning to thaw. But what promised to be a sneak preview to a turn-around, rapidly changed course; over the past week, the US Banking system teetered on the brink of collapse for the third time in four months. Citi finally accepted the fait accompli that its days as a Universal Bank were numbered. Bank of America’s much vaunted acquisition of Merrill Lynch almost came unstuck!
The US Treasury and Federal Reserve (along with the FDIC) have made multiple attempts at resuscitating the credit markets. After the TARP approach of investing in Banks’ preferred stock and (subsequently) using the back-stop guarantee mechanism, the latest thinking among US Government bureaucrats is to segregate the “bad” assets on Banks’ balance sheet from the good ones or what is popularly being termed the "Good Bank – Bad Bank" model.
Read more about this on the Think Flat site.
