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Bailout backfire
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Smoron
Oct 8, 2008, 1:02:34 PM10/8/08
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It is possible that the 700 billion dollar bailout may backfire. The
banks will have to sell their bad derivatives at less than cost, thus
incurring a loss. Such losses may put the banks in bankruptcy.
banks will have to sell their bad derivatives at less than cost, thus
incurring a loss. Such losses may put the banks in bankruptcy.
They can carry such derivatives on their books at full value until
there have been sufficient sales to establish a new and lower value.
The fact that just some banks sell at less than full cost may put all
banks under a lot of pressure.
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