[quote=sdybob]I turn to think the underline reason of the seemingly stupid decisions is the result of the recent accounting rule change, which allows banks to use non-realistic valuation for the assets they hold. Banks pushed congress for the change and achieved their intended consequences, i.e. they can now hold bad assets as they were good assets. As such, they would rather hold onto those assets, so their books look better than they are actually are. Short sale will realize the loss and their books will look worse. Same for the pace of foreclosures, they have no urgency to get the loans off the books, instead they like them to stay in, so they do not have to look for new capitals.[/quote]
PRECISELY, they have no big interest in doing a short sale as they will have to book the loss.