But they will either sell (at a "market/book" clearing price) to the FEDS or DIE. They will have no choice.
So far, banks have been unwilling to do so, because they’ve been valuing the debt way above market value in order to maintain capital ratios.
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Do you have facts to support that?? Any audited company (which all the banks are) would need to take the write-down every quarter when they release earnings. In these days of Sarbanes Oxley, no auditor would allow a company to release earnings that didn’t have an “attempt” to write them down to market.
IMO, the issue is that the write-downs have been taken but right now they are paper losses. By selling to the goverment, they become real losses.