Banks, which typically hold only a fraction of deposits as cash reserves, must liquidate loans in order to raise the required cash.
Banks are liquidating loans with a ven-geance and putting their cash into government securities.
Banks would liquidate their loan portfolios and raise deposit rates in order to maximise their excess reserves.
On paper at least, banks had assets that more than covered their commitments to their creditors, but they were unable to liquidate these loan packages for cash when these commitments came due.
Another buy is Thailand, where new Prime Minister Thaksin Shinawatra recently set up a special government trust to help banks liquidate bad loans and raised interest rates to attract foreign capital, which Templeton says should let the Thais achieve a projected 4% economic growth next year.
The Federal Reserve should provide a credit facility to commercial real estate owners as a lender of last resort with the government obtaining an equity interest (but not control) over the real estate in order to avoid the real estate from being dumped on the market, thereby further depressing values, which will also provide lenders with a way to liquidate their loans.
The cost of liquidating the loan exceeded the proceeds.
With such a permanent, massive infusion of money, the process of liquidating unresuscitative loans could be undertaken in earnest, without bringing down the whole financial system.
It described the inner workings a financial deal under which Citibank, before the 2008 financial crisis, committed $525 million to an investment fund run by Relativity and its chief executive Ryan Kavanaugh, but recently bargained its way out because of pressure from Federal officials to liquidate risky media loans.
Freshly anointed by hapless Prime Minister Junichiro Koizumi to do whatever is necessary to fix Japan's financial system, Takenaka vows he will force banks to aggressively recognize and liquidate their bad loans, particularly those to some 30 "zombie" companies.
At the F.D.I.C.'s Kansas City, Mo., office, which is only a year old, liquidation chief Carmen Sullivan has already hired about 900 people to help liquidate some $500 million in loans and farmland.
