Geithner's strategy is a step in the right direction for closing up the wildly different views buyers and sellers have of the assets up for grabs, Grant adds. Substantial differences do not reflect "the normal language" of a functioning market, he says.
Indeed, Geithner's plan could result in higher values for the toxic assets, which many view as substantially undervalued. Yet to be determined is how high they will go. Grant believes the plan, if successful, should give us a realistic view into the asset's current value, forcing banks and the government "to face the truth, whatever it is." And the truth may result in Geithner once again going to the bailout drawing board. "These asset values could show that some financial institutions are more insolvent than we thought," Grant says.
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