It has pretty much always been this way. If they acted rationally, they would minimize losses. They don’t. They spend enormous amounts of time (and money) in valuing assets, then make decisions which seemingly ignore that valuation, and choose an option which increases their losses. I watched it happen during the downturn in the early 80’s, again in the early 90’s, and once more during the current crash. It is systemic stupidity.
(In fairness to asset managers, it may in fact be management. I was part of the management team for the court ordered liquidation of a $250 million hard money lender portfolio in the early 90’s, and we employed some very competent asset managers that had big bank experience. They provided detailed evaulations of every asset but it was always management’s decision to pull the trigger on a deal. I have no idea what level of management pulls the trigger for big bank distressed asset departments. Whoever it is, they do a crappy job.)
