What's Behind Geithner's Threat

Maybe it's all about the toxic asset issue.


Read this new analysis of the banking situation by Goldman Sachs. It mentions that banks will need some encouragement to sell the so-called toxic assets. I think Geithner is giving them some with his threat to replace executives:

First, it’s unclear whether Treasury and the FDIC will persuade enough investors to participate and enough banks to sell.  On the investor side, note that the Treasury has just extended the application deadline for the securities portion of the program.   (This refers to the securities portion rather than the more important loan portion)  On the banks side, we continue to think that the that the bid prices will still be well below the banks’ current marks, at least for whole loans held to maturity, so banks will need some encouragement to sell.