The 93-7 Rule

In my last post, I tried to correct myself and said Geithner's PPIP was only for bondholders who would purchase a small percent of their toxic assets and hold them in a special purpose entity until they can reach a decent value with, of course, taxpayers paying 93 percent of that.

But, it turns out I was right the first time. Banks do want to purchase these assets and, why not? If the federal government holds 93 percent of the stake and banks purchased them for 7 percent, they wouldn't have to take 100 percent of the loss like they would have to do on some of these "toxic assets." In reality, most of these assets would be a 40 percent loss at best.

http://online.wsj.com/article/SB124338836675757049.html

And, in about 6-10 years, they might be worth something and the banks might be worth something as well.