Firms may “look solvent today only because it’s kind of hidden. They actually are insolvent.”
Our Chief Bookkeeper, Peter R. Orszag, director of the Congressional Budget Office points out Bush’s bailout could expose the way companies are stowing toxic assets on their books, leading to greater problems.
“Ironically, the intervention could even trigger additional failures of large institutions, because some institutions may be carrying troubled assets on their books at inflated values.”
“Establishing clearer prices might reveal those institutions to be insolvent.”