A quick note before the big news tommorow: Word is that the treasury will create a program to insure bad assets to stimulate private capital to buy them off banks. 'Insurance' could mean anything from principal protection to cashflow guarantee. This insurance adds a free married put to anything previously considered garbage, and lets the government carry trillions of dollars of risk off balance sheet without printing a dollar.
Regardless, this is a workaround to revalue assets up higher than the market would clear at. It achieves the same end essentially as shifting to a mark to model for banks, but with the benefit of more inherent trust in the system. Capital requirements will be instantly met, and with market clearing above previous values (as the new treasury insurance program adds value) we should see an upward revaluation within the financial sector. Lending should flow with a little more ease as well.
This seems like a buy for financials on all counts.
0 comments:
Post a Comment