They’ve been for blamed for poisoning banks’ balance sheets and bringing down the economy. And now the U.S. government is planning to buy a trillion dollar’s worth of them.
CNN / FOX News / CBS / FOX News
But just what are toxic assets?
American Public Media’s Marketplace begins our look, comparing the toxic asset situation to a wine merchant who gets to decide what vintages a customer buys.
“Mr. Lewis has gone to his local wine seller and he’s not very happy and we’ll see why in a minute…because the wine seller has given him a mixed case, a box of wine and he’s left it up to the wine seller to decide what goes in the case. This is an appropriate analogy because a lot of people say the banks have a mixed case of securities when they’ve gone out to buy their CDOs or mortgage-backed securities.” (marketplace.publicradio.org)
ABC compared banks to a fruit stand trying to sell apples with worms in them.
“The apples represent mortgage backed securities bundles of home loans bought up by the banks and now worth far less than the banks paid for them.”(www.abcnews.com)
The Atlanta Journal-Constitution describes toxics assets as “paper time bomb[s].”
“A toxic asset isn’t a formal economic term but rather a catchphrase that’s cropped up during the recent crisis to describe assets whose value has fallen so much that their owners face enormous — and potentially fatal — losses.” (www.ajc.com)
Here’s how CNN tries to explain it:
“The simplest definition of toxic is an asset that’s difficult to sell because the market has dried up.” (www.cnn.com)
So, what’s your definition of a toxic asset? Check out our sources and let us know your thoughts on this story at Newsy.com.
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