Why bad banks might be a good thing

Paddy Hirsch explains Fed Chairman Ben Bernanke's latest plan to get the economy moving and the risk involved. #MarketplaceAPM #FederalReserve #EconomicExplainers
Subscribe to our channel!
/ marketplacevideos

[@piemanny]

Bad banks take the weight off existing banks. The bad bank is hoping to buy the securities at the mark down price and hoping that they will rise as to make a profit in the future. The securities they buy are only POTENTIALLY toxic but there is still a chance that they can be repaid. The banks who sell them do so because they cant afford to hold that risk that the asset may lose them money and so bad banks give them the option to not hold it.

[@johnpolo7160]

A very short but comprehensive art. Many thanks for your contribution to understanding and education you have done so far....

[@Reve101]

Great video, thanks a bunch; and I really like your use of metaphors for explaining these financial terms and situations.

[@elpresidio]

Please keep up the great videos! Learning so much. Your explanations are very clear and it simplifies it for many people like me who are not experts.

[@TheLivirus]

To me it seem like modern economics is just a bunch of patches and workarounds for an outdated monetary system.

[@krapfantasy]

such great videos, never take these down! huge resource, big upp to Paddy!

[@bogi003]

awesome explanation, big thanks!

[@rli421]

Yea, great analogy. Really helps the average person understand what's going on.

[@lambo5688]

Great video. Very informative. Thanks!

[@Pythons80]

I find generally any entity that is described as "Bad" is something best avoided. Examples include: "Bad" Sandwich, "Bad" haircut, "Bad" shoes, "Bad" lawnmower, "Bad" glasses, "Bad" usage of public funds, and of course "Bad" banks. The only exception to this rule is with regards to Michael Jackson era urban lingo, in which case the word "Bad" is taken to mean precisely the opposite (good). However, it is not clear in this video whether or not this is in fact the intended usage of the term.

[@ndettombalu2485]

Great analogy!!!!!

[@TheWizardGamez]

What if the bad bank has a net loss

[@arunlearn]

How is this different from money laundering?

[@__________Troll__________]

Guess the stick man is not human or he's half giraffe

[@curiouschem]

it is all based on loans gone bad because people have no job to pay their loans. until jobs become the issue, then all is lost. moving unpayable debt to another closet doesn't make it payable. the gov(fed res bank) can adjust the "assessment" of the probable payment of the unpayable debt, by taking over debt institutions or propping them up(treading water), but that's just trying to squeaze a little more out before all is lost.

[@godspawn007]

IF that is supposed to happen in theory, it probably won't happen in reality. This type of thinking is based in politics, always has always will be. Henceforth, banks have to be more responsible with their assets and take the loss before they try to market the bad assets. It's a way more ethical type of thinking. If banks true goal only continues to be to pump more creation of wealth through debt from nothing then it will surely fail. It has happened before and it will happen again.

[@grapeshott]

But who will buy those bad loans? No one is paying the interests for them, that's why they are NPAs in the first place.

the analogy is wrong..