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VIDEO:
Tavakoli Says U.S. Shouldn't Guarantee Toxic Assets
Bloomberg
TV - February 4, 2009
Janet
Tavakoli, president of Tavakoli Structured Finance, talks with
Bloomberg's Pimm Fox about proposals to deal
with troubled assets on the balance sheets of U.S. banks that are
clogging the U.S. financial system.
Janet
Tavakoli is for proposals that require private equity investors
to put up 20% of their own money. The U.S. Treasury will put
up 80%
with
the following
terms:
it gets paid back first, receives interest on its investment, and
gets a share of the profits. This is a way of ensuring market pricing
and allowing the banks to delever while the Treasury (the only
source of a large enough balance sheet) levers up with the protection
of a 20% cushion and mark-to-market pricing.]
Among
other reasons to urge mark-to-market accounting, there is a multiplier
effect of losses (for some securitizations) because“total
loss” tranches
were transferred to other securitizations (especially synthetically),
so that some CDOs and CDO-squareds are largely worthless. No
one can tell which securitizations have this problem without
analyzing each one. The Treasury will buy a pig in a poke. This
is not
a matter of opinion or “different views” it is a
matter of fact.
Janet
Tavakoli is the president of Tavakoli Structured Finance,
a Chicago-based firm that provides consulting to financial institutions
and institutional investors. Ms. Tavakoli has more than 20 years
of experience in senior investment banking positions, trading,
structuring and marketing structured financial products. She
is a former adjunct professor of derivatives at the University
of Chicago's Graduate School of Business. She is the author of: Credit
Derivatives & Synthetic Structures (John Wiley & Sons,
1998, 2001), Structured
Finance & Collateralized Debt Obligations (John
Wiley & Sons, 2008).
Janet Tavakoli's book on
the causes of the global financial meltdown
(and how to fix it) is Dear
Mr. Buffett: What An Investor Learns 1,269
Miles From Wall Street (John
Wiley & Sons January 2009).
Clients
of Tavakoli Structured Finance
have the benefit of proprietary research, which
is not available in any other paid or public forum. Clients
also commission proprietary research and analysis.
TSF
makes some information available to the general public. Please
click here for other articles.
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