What are the illiquid bonds worth?

[JimofPennsylvan]

One huge question on this financial institution rescue legislation seems to be what are these mortgage backed bonds worth that these companies are stuck with and which are jamming up their operations?

A lot of people seem to be acting like valuing these bonds is like throwing a dart at a dart board or shooting in the dark, it is completely a subjective endeavor. Some people say the U.S. government could legitimately value these bonds anywhere between the price the bonds would get today if sold into an illiquid market and a hold to maturity price where the burrowers of the mortgage loans which the bonds are based on pays off in full.

No one in the media seems to be focusing on the fact that economists and financial experts should be able to determine the realistic practical value of these bonds to a relatively accurate degree. By this it is meant that economists and financial experts should be able to predict with relative decent accuracy how many of the underlying mortgage burrowers on these bonds will pay off. Therefore, these experts will be able to relatively determine the practical value of these bonds. Therefore, this is what the Treasury's asset managers should pay for these illiquid bonds from these financial institutions(the present value of bonds which have this practical pay off value in the future), it is called we'll pay you what their actually worth! There really shouldn't be this big dilemma on what to pay for these bonds.

 

[Kevin_Kennedy]

Well they're illiquid because they're worth nothing.

 

[editec]

Until there is a viable market for them nobody knows.

That is the problem!

 

[chopcrazy]

Well they're illiquid because they're worth nothing.

Nobody's is buying because of the difficulty in valuing those bonds/mortgages from those with poor credit or near default as well as the potential for the direction of the economy. It would take a lot longer than one week to value them so I do not see how the government could get or give a fair market price on the debt if it agrees to a bailout in a week's time.

 

[editec]

Nobody's is buying because of the difficulty in valuing those bonds/mortgages from those with poor credit or near default as well as the potential for the direction of the economy. It would take a lot longer than one week to value them so I do not see how the government could get or give a fair market price on the debt if it agrees to a bailout in a week's time.

It can't.

That is ONE of the problems with this bailout.

And that is hardly the worse problem with it, either.