[politicket]

But if you can borrow most of the price, you can double your *equity* paying 50, if they are really worth 60.

Your scenario is true if the banks are willing to sell at 50 with a true value of 60.

But what about all of the banks that have most of their toxic assets still marked around 92-95 and won't budge downwards unless it's them buying their own debt?

There are still a lot of banks carrying their commercial loans at 100.

This is why the PPIP won't work. The 84 that the FDIC uses as an "example" auction is a dream. Very few banks will touch that.

Citi and BAC are buying all of the Alt-A and ARM that they can get their hands on. They're about to game the system - at the taxpayers expense.

[JasonC]

Um, bank debt is at 50 cents. They have a confidence problem much, much bigger than the cash flow opportunity. Clearing the decks of future marks, then showing 1-2 quarters of all upside earnings, is what they need to get people to notice that high leverage on a positive number works rather well, and that they will recover equity the old fashioned way, by earning it. They don't want another 6 months bouncing along the floor at stock prices of $2 as populist idiots wail for their nationalization. Trust me. Now, if they think they can just post huge earnings directly, great, they will. That's fine. The point of the whole thing is to bring the *bid* for these asset classes up. That helps even those that keep it; it cuts their marks.