Frightening as the markets look today, there will come a time when the liquidity crisis ends and today's prices for bank stocks look, in retrospect, like bargains.
The panic is writ large in the prices of financial stocks, whether of brokerage firms, banks or steeply leveraged real estate investment trusts. The exceptionally low interest rates of the early and mid-2000s created enormous temptations to buy assets with borrowed funds. Some of the assets were subprime and Alt-A (almost prime) mortgages, now worth less, often considerably less, than their par value. Other purchases were of derivatives constructed atop these mortgages.
Read the complete article
The panic is writ large in the prices of financial stocks, whether of brokerage firms, banks or steeply leveraged real estate investment trusts. The exceptionally low interest rates of the early and mid-2000s created enormous temptations to buy assets with borrowed funds. Some of the assets were subprime and Alt-A (almost prime) mortgages, now worth less, often considerably less, than their par value. Other purchases were of derivatives constructed atop these mortgages.
Read the complete article
