Here’s a maths puzzle to test the most numerate of readers.
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The Audit Commission has downgraded the ratings of five local authorities for the sin of putting some of their money in Iceland.
As you may remember from this blog, the commission itself was forced to admit – at about the same time – that it had been keeping millions in the country once described (long before the bank failures) as “a giant hedge fund”.
A scheme to ring-fence toxic assets on individual banks’ balance sheets and insure them against default looks set to be the centrepiece of the latest bank bailout – which could be announced as early as tomorrow*. Read more about it here.
This has the advantage that bad loans would not have to be marked to market. That would not have been the case under the more generic “bad bank” idea, which would have meant all banks tipping their toxic debt into a single which the government would then have to value.
But wouldn’t this undermine Gordon Brown’s claim – in an interview with the FT on Friday – that banks must admit how many “toxic assets” they have on their balance sheets?
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