The Mortgage Man

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Bad Bank, Good For Economy

The Federal Deposit Insurance Corporation (FDIC) announced last night that it will create a “Bad Bank” to purchase the toxic assets on the books of the nations banking institutions.  This was originally part of the TARP plan but it didn’t work out as planned.

The idea is that because of Mark-To-Market accounting, these toxic assets are killing banks and there is no real hope for financial recovery until Mark-To-Market is repealed or an outlet to dump these assets is created.  Ideally, the best scenario would be both.

The stock market is reacting favorably to the news as it is a sign that the government is making strides in the right direction.

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