The financial institution values the bond at 97 cents on the dollar. Standard & Poor’s values the bond at 87 cents at the current default rate, but estimates the bond’s value could go down to 53 cents if the default rate doubles. But someone actually bought one of the bonds recently. The purchase price was 38 cents.
According to the article, financial industry critics "say that the banks’ accounting for those assets cannot be trusted because they have an incentive to use optimistic assumptions."
"Optimistic"? Whoever paid 38 cents on the dollar for one of those bonds is a giddy optimist. The financial institution’s valuation of 97 cents on the dollar is pretty clearly fraudulent.
For over a year the one point that I and others have been trying make is that the polite fiction that masters of the universe of Wall Street and their defenders in the media and Congress have been trying maintain, that this is liquidity crisis not an insolvency crisis, is utter horseshit. They made bad leveraged bets and lost immense amounts of money, and now they, and their buddies Geithner and Summers, want taxpayers to bail them out so they can go on living their opulent life styles while some of my neighbors wonder if their next food stamp card is going to show up.