DIGG THIS The problem The central problem of the current financial difficulties is troubled assets. These are loans whose value has fallen sharply. The loans are owned or held by financial firms such as banks, insurance companies, mortgage lenders, broker-dealers, hedge funds, mutual funds, pension plans, and investment bankers. When the loan values fell, there were many effects, a few of which will be mentioned. Many firms became insolvent, that is, the value of their assets fell below the value of their liabilities plus equity. They continued to operate but their bankruptcy risk rose. Some highly-levered firms that had excessive … Continue reading Troubled Assets