Deleveraging

Here's my favorite part:

The company fired the executive who had authorized the CDO purchases, and his replacement told O'Connor he wanted to get them off the company's books by year's end. He was willing to take just about any price.

O'Connor canvassed possible buyers and came back with a bid of 2 to 3 cents on the dollar. "Not that low," the executive said. A second bid of 8 cents was also rejected.

O'Connor found a new buying group willing to up the ante: 10 to 15 cents on the dollar. O'Connor thought he had a winner.

"I told the company that we had what I considered a very realistic buyer for the entire $40 million of assets," he said. "But after a couple of days, the corporation still rejected it.

Apropos of this week's Econ Talk, this positively reeks of regime uncertainty. They know they should dump the CDOs for whatever they can get for them so they can get on with their lives (and since CDOs are being valued basically at zero, it would actually improve their balance sheet, right?) The problem is, if the government comes along in three or four months with a big wad of bailout cash, the executive who dumped them for fifteen cents on the dollar will be the one losing his job. No, better just to sit tight and see what happens.