he U.S. Army is undergoing a major transformation to ensure that its future capabilities meet the needs of the nation. One element of its transformation strategy is the recapitalization (RECAP) program, which entails rebuilding and selectively upgrading 17 systems. The program has continuously evolved, with ongoing
With the value of their toxic assets written down to zero, a number of banks will no
longer meet the legislated core capital requirement. The government should take a stake
in these banks in order to recapitalize them. The prior removal of troubled assets will
limit the risk taken on by the government and provide good prospects for the appreciation
of its investment. The government’s risk of loss (through the bad bank) and opportunity
for success (through the rescued good bank) would thus be clearly separated from one
another. This would also contribute to transparency.
The Table below organizes known bad bank examples and current proposals
according to the source of capitalization and organizational form. As the Table
shows, the majority of known bad banks have been established based on a decentralized
organizational model. Retriva and Securum (Sweden) as well as BIH (Berlin) were
founded through the subdivision of a bank threatened with insolvency into a good
and bad bank. In all three of these cases, the government provided the funding for the
bad bank and also recapitalized the good bank in exchange for a shareholder stake. ...
The current shareholders will cover the resulting losses. Under the plan,
the government would bear responsibility for the management and future resale of toxic
assets at its own expense and recapitalize the good bank by taking an equity stake in it.
The risk to taxpayers from this investment would be acceptable, however, once the banks
are freed of their toxic assets. A clear emphasis that the government stake is temporary
would also be necessary.
,,,and the Army Materiel Command (AMC) have been examining which systems (both type and portion of the fleet) should be recapitalized and defining what that renewal process should involve (the extent of work for each “overhaul”). Accordingly, OASA(ALT) is sponsoring RAND Arroyo Center research on how equipment age affects readiness and resource requirements, to aid analyses in support of RECAP decisions.
The current strategic airlift fleet will be reaching the end of its service life in the next few decades, which has raised concerns about the cost and possible budget spike that would result from the need to recapitalize that fleet. This monograph presents the results of a cost-effectiveness analysis to determine
Most of the sovereign bank debt likely to be
exchanged, however, is held by larger German, French and Swiss banks with the capability (if
not necessarily the desire) to take the write-offs required. The overhang of such future losses
affects the entire European banking system at a time when it too is being restructured.
Bonds are considered high yield (or junk) based on the credit ratings they receive from the two major US rating
agencies, Moody's and Standard & Poor's. Any bond rated below Baa3 by Moody's or BBB- by S&P is included in
the high yield universe. High yield bonds are classified in two ways, as "fallen angels", which are former
investment grade bonds that have declined in ratings, and as new issue high yield bonds, which are issued
generally by young, growing companies in recapitalizations. The growth of the market has been exceptional.
With subprime mortgages representing only about 14 percent of the stock of US mortgages, most observers expected rising delinquencies in this segment to be contained at moderate cost. Testifying in July 2007, Federal Reserve Bank Chairman Bernanke estimated that credit losses associated with subprime mortgages would probably total $50 billion to $100 billion. As we now know, what began as a subprime crisis has proved to be wider, deeper, and more damaging than originally thought.
Just to round out the sketch of what’s happened, I add the following. Large financial firms in
distress have received something like $50- billion in recapitalization funds from sovereign wealth
funds. So far there have been very few bank failures, five according to the FDIC since February
2007, but apparently 75 more institutions are on the problem list. One of the reasons why the crisis
hasn’t been more damaging is that most banks, especially large ones, went into the crisis with high
A third feature of the ongoing crisis follows from the preceding one.
The expected cost of failure to the economy at large should still be the key criterion for determining which financial firms are regulated and which are not, since this is what drives de facto eligibility for the official safety net, be it deposit insurance, access to the central bank’s liquidity assistance, or use of public funds for recapitalization or nationalization. Size, leverage, and the degree of “entanglement” in financial markets should all be important in making the eligibility decision—more so than how firms classify themselves (as banks, nonbanks, etc).