Capital, not asset purchases

Buying a bank’s bad assets helps only if you overpay; giving it capital helps directly.

• Banking
• Crises and market history

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• ArgumentBankingLetter

  Buying a bank's bad assets helps only if you overpay; giving it capital helps directly

  A rescue that swaps assets at fair value changes nothing; only new capital changes a bank's solvency.

  Banking crises, bailout design, and the interview question of what a capital injection does that asset purchases do not.

  From John Hussman's October 2008 market comment on recapitalising the banks · John Hussman