Frank, our volunteer web app hacker and SF organizer, points out this article (he’s also the moderator at the 6/10 SF event, go see him there). Many people, including Nobel Prize economist Akerloff and us, predicted that financial companies would not sell their toxic assets (the mortgage defaults and the securities that are bundled defaults) because they can instead spread the difference in buying and selling prices over three years instead of one. They don’t care about this country’s financial recovery, why should they?
Many banks have refused to sell their loans, in part because doing so would force them to mark down the value of those loans and book big losses. Even though the government was prepared to prop up prices by offering cheap financing to investors, the prices that banks were demanding have remained far higher than the prices that investors were willing to pay.
In a statement, the F.D.I.C. acknowledged that it had not been able to get banks interested in its so-called Legacy Loans Program. Scheduled to start later this month, the pilot program was aimed at selling off $1 billion in troubled home mortgages.
F.D.I.C. officials portrayed the change as a sign that banks were returning to health on their own.
Archein