Bad Bank Plan

[tryan]

The bad bank plan is a return to the Resolution Trust Corp. (RTC) scheme which resolved the S&L crisis in the mid-1990's. Assests acquired by the feds were auctioned off at absolute auctions over the course of 2 years (1993-1995). Expect the bad bank plan will do the same.

There will be some unbelievable opportunities at these absolute auctions ... think 10-20 cents on the dollar. But cash will be king. You heard it here first.

It'll take some time for this thing to play out ... I imagine a year or two for the gears to begin to turn. So save your pennies!

Treasury details public-private plan for banks' toxic assets - MarketWatch

 

[tryan]

Not sure how this got move ... what's political about the bad bank plan?

 

[ziggy29]

I moved it as a judgment call, primarily because this is the kind of topic which needs leeway in discussing its political aspects. It will be very hard to have a good discussion of this topic without enabling some commentary on the political nuances.

It's not that your comments were political at all, but the subsequent discussion of it will be.

 

[audreyh1]

Maybe the moderator thought you were calling the bank plan bad? Although that's not necessarily political either. Hopefully they'll switch you back.

Audrey

 

[Westernskies]

Not sure how this got move ... what's political about the bad bank plan?

Welcome to the new FIRE forum.

 

[ziggy29]

Maybe the moderator thought you were calling the bank plan bad? Although that's not necessarily political either. Hopefully they'll switch you back.

Actually, contrary to the opinion of some people (not you) who seem to think we're trying to do nothing but squelch political discussion, I think that given this plan comes from a presidential administration (a political entity) and that solid discussion of this very relevant topic is only possible by "enabling" political discussion of it, I felt that by moving it here, we'll allow people to weigh in more comfortably with the political/public policy aspects of the plan.

My question to the administration is: Do they really think they're going to induce demand for these so-called toxic assets? How much is the taxpayer going to take the risk in order to encourage private investment in these toxic assets? And given the current Congressional mood post-AIG, how much more money would they be willing to allocate should existing "lines of credit" given to the Treasury by Congress be insufficient? There's not much political will for more handouts/bailouts at this point...

[Edit to add: I'm moving this thread back and giving the benefit of the doubt for now. But in the FIRE and Money forum, understand there is less leeway for politically-charged posts.]

 

[calmloki]

Dang skippy there will be demand! The Resolution Trust days are where we got started. I'd kinda like to retire, but a return to the times when i bought a triplex for $18,000... When i think inflation is a given? I'm about to resign myself to a buying spree!

 

[youbet]

Zig.....

It sounds like you moved tryan's thread so YOU could make politically charged comments!

I'm hoping we can discuss this latest govt move without resorting to political bickering as I'm becoming convinced that the current so-called "bailouts" are going to be the primary determinate of investment success or failure over the next decade or two. The size of the public debt and the extent of ongoing govt involvement in the financial system and in commerce may very well change the basic rules most of us invoke in our planning and decision making.

 

[ziggy29]

I'm hoping we can discuss this latest govt move without resorting to political bickering as I'm becoming convinced that the current so-called "bailouts" are going to be the primary determinate of investment success or failure over the next decade or two. The size of the public debt and the extent of ongoing govt involvement in the financial system and in commerce may very well change the basic rules most of us invoke in our planning and decision making.

I'd go beyond that -- I think it will be a major determinant with respect to whether or not today's younger generations even have much of a future. With the debt levels we're creating, each newborn baby is now entering the world with an 800-pound gorilla of debt encumbering his/her chances of future success. And that 800-pound gorilla is threatening to turn into King Kong.

 

[tryan]

The Resolution Trust days are where we got started. I'd kinda like to retire, but a return to the times when i bought a triplex for $18,000... When i think inflation is a given? I'm about to resign myself to a buying spree!

I also cut my teeth in the RTC days. Bought mostly single families ... paid: 8.5k, 15k, 19k, 17k then bought what I thought was a single for 4.5k only to find out I owned the DUPLEX behind the building too! Those were the days!

Happy days are here again!!

P.S Ziggy - I understand where you're going. BTW, I see this as a great FIRE opportunity.

 

[youbet]

I see this as a great FIRE opportunity.

Hmmmm.... Interesting. Please go on...... It sounds like you have some ideas regarding how small, individual investors might reap some gain from this.

 

[calmloki]

Perhaps

Step one: Buy cheap (cue Cramer - BUY BUY BUY!)

Step two: Hold, paint, clean - maybe rent out if you have the stomach and like the return.

Step Three: Sell - maybe doing owner-carry contracts at a bit over the going rate because it's easier for the buyer to qualify with you than a bank and you're not charging points or a myriad of fees. Profit and just sit back like a fat cat lighting your cigars with the envelopes the monthly payments (mostly interest) come in.

 

[Westernskies]

I'd go beyond that -- I think it will be a major determinant with respect to whether or not today's younger generations even have much of a future. With the debt levels we're creating, each newborn baby is now entering the world with an 800-pound gorilla of debt encumbering his/her chances of future success. And that 800-pound gorilla is threatening to turn into King Kong.

Agreed, and thanks for the inspiration for my new avatar!

 

[tryan]

Here's a real life example-

Step 1 : Paid 8.5k for a 2 bedroom SF at an rtc auction

Step 2: Moved a decent existing tenant from a multi family and collected $550/mo for 6 months

Step 3: Sold to the tenant within the first year carrying $45k in a first position. Monthly payments (with escow) ... $550/mo. But he has all the maintenance, water- sewer, insurance and taxes.

Only problem was 7 years later he re-fi'd out of my loan to tap equity. So I had to find someplace to put the windfall.

 

[youbet]

Might any opportunities for passive investments develop out of this so-called "bad bank plan?"

 

[tryan]

seems like a real opportunity for a reit manager to specialize in goverment assets ... don't remember anything like that forming out of the RTC clean-up (but I wasn't looking for it either)

 

[Texas Proud]

One problem with this as opposed to the old one... the toxic assets are financial in nature... I am not sure how much of the 'real' stuff is going to be bought by the funds...

 

[tryan]

but behind every toxic loan is a toxic house. Wasn't the S&L mess similar/identical?

 

[wallygator69]

I also cut my teeth in the RTC days. Bought mostly single families ... paid: 8.5k, 15k, 19k, 17k then bought what I thought was a single for 4.5k only to find out I owned the DUPLEX behind the building too! Those were the days!

Happy days are here again!!

P.S Ziggy - I understand where you're going. BTW, I see this as a great FIRE opportunity.

I've been itching to pickup a foreclosure but this sound even better.

How did you find these properties?

PLEASE...

Thx

W

 

[tryan]

If the future is anything like the past, the auctions will be run by a large national clearing house like this one:

REDC

But web-base auctions are certianly possible too (to grab a world-wide audiance)

Stay tuned.

 

[ChrisC]

I've been itching to pickup a foreclosure but this sound even better.

How did you find these properties?

PLEASE...

Thx

W

Better hurry fast -- the market for this stuff appears to be at the initial stages of an explosion, according to some of the stuff you read in todays's blog here: Calculated Risk

I started looking with my daughter the last few weeks for her first home purchase; the number of foreclosure (REO) and short sales in the Northern Virginia suburbs has my head swirling.

I'd use a realtor for finding properties, for the most part. Also, if you look patiently at the newspaper public notices section, you can get the upcoming foreclosures; there are a lot of local auctions for Bank REO. Several banks have websites that list their REO stuff. Also, Government agencies, like HUD and VA, have properties they're trying to sell too.

 

[tryan]

Chris C -

I am sure you and your daughter will have an easy time finding a decent deal for a first time home investment.

As an investor, having gone to several REO auctions, these things still don't cash flow in my hood (north of Boston). Unless you want to do business in the nearest inner city. So I am still on the sidelines.

I expect the "bad bank plan" will change the cash flow problem.