Remember all the talk about the bank's toxic assets in 2008, well it looks like that is starting to resurface. Two articles that caught my attention yesterday made me think that Tarp 2 can't be far behind. If Tarp 2 doesn't materialize then I would think that QE 2.0 will be bigger than anyone thought.
From the first Bloomberg Businessweek article here:
JPMorgan analysts said mortgage repurchase costs stem from $2 trillion of loans that have defaulted or are likely to go bad, among the $6 trillion of U.S. mortgages and home-equity debt originated from 2005 through 2007. The defaults will create about $1.1 trillion of losses for banks, government-supported Fannie Mae and Freddie Mac, bond investors and insurers.
From the second article here:
Pacific Investment Management Co., BlackRock Inc. and the Federal Reserve Bank of New York are seeking to force Bank of America Corp. to repurchase soured mortgages packaged into $47 billion of bonds by its Countrywide Financial Corp. unit, people familiar with the matter said.
I guess I should have known this was coming after the March 2009 decision by Financial Accounting Standards Board (FASB) to relax fair-value accounting rules. This meant that banks no longer had to value assets utilizing mark to market and instead could use the mark to "whatever number the bank wants" method.
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