The Rise (But Not From The Dead) Of Zombie Banks
As share prices of financial firms have continued to climb this year in the face of an uncertain economic recovery, the discussion about the role of so-called zombie banks is beginning to come up again. Wednesday, Reuters’ Rolfe Winkler pointed out a discussion between three economists about how zombie banks are hoping that a sudden return of liquidity to mortgage-backed securities will one-day raise them up from the dead. Winkler highlights Boston College finance professor Ed Kane’s comments about this kneel-and-pray strategy. It’s worth re-posting: Kane: Another point is that these so-called “hard-to-price assets” have much more value to “zombie banks” than to anyone else, which is why there is no liquidity in that market. The deeply insolvent institutions want…
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