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subprime question anyone

  1. 5,302 Posts.
    Ok we have heard banks overseas, meryll lynch etc etc claim huge writeoffs. In the billions.

    Ok, so they lent money out and cannot get it back.

    So the bank a claims a 9 billion dollar writeoff???????????

    Now the bank is 9 billion less in the balance sheet.

    Can someone explain this for me.

    So all these banks will have at least a 9 billion dollar loss. And there are many in the USA who have written off billions.

    Ahh but after reading through http://en.wikipedia.org/wiki/Write_off
    i see the how these games work

    Banking

    Similarly, banks write off bad debt that is declared uncollectable (such as a loan on a business that is now defunct), removing it from their balance sheets.


    Write-down
    Many of the consequences of the subprime crisis at financial institutions are referred to as a "write-down", which is synonymous with a write-off[1].

    While a write-off in banking refers to a bad loan that is declared uncollectable, removing it from its balance sheet, a write-down, according to Investopedia, means:[2]

    Reducing the book value of an asset because it is overvalued compared to the market value.
    So while a "write-off" removes the loan from the balance sheet, a "write-down" reduces the value of the loan in the balance sheet. Despite this difference, both terms indicate that the loaned money in question has no chance of being recovered.


    So my point is, this billion dollar loss is removed from the Balance sheet. This does not add up in my mind.

    I lost 9 billion, I think this will show up in my bank account...

    Where did the 9 billion dollar loss come from. Meaning where did the bank get this money to lend out. They lost it right....

    So who's money did they lose. If it was their money why is it not in the balance sheet.......

    The only thing that will be reduced is Assets as i see it.
    9 billion in assets.. But this asset is MONEY.......

    So they write off 9 billion dollars from their total loans.

    So people lose their homes, go broke, kill themselves and starve to death, while the banks change their billions in losses from the balance sheet and carry on lending money.

    Where does this damn money come from and who lost the 9 billion dollars and why are they still in business.


    regards...
 
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