Why Fair Market Values Should Drive Revised Bailout Plan

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  RE: Why Fair Market Values Should Drive Revised Bailout Plan

  Fair value is good, but the liquidity (yeild)premium charged to buy these assets is so high that "fair" value is debatable. It has already been demonstrated that when CDOs trade, fair market can be as low as 20% of the underlying mortgage loans. Banks need to receive upwards of 80% in order to sufficiently recapitalize and will probably name that price as the bill stands. Mortgage analysts, meanwhile, have estimated losses on Sub-prime and Alt-A to be as high as 55%. So, is 45 cents on the dollar "fair"?
  
  What is needed is a disaggregation of the CDOs back into more transparent mortgages, or pools. Only then can discounted cash flow analysis arrive at both fair and resonable values. Only then will enough potential buyers be able to form a market for this garbage.
  
  Following the above, I would subscribe to a socialized equity stake for each additional dollar we put ourselves on the hook for so that the system is moving, once again.