Dead Banks Walking

[marmar]

via MichaelMoore.com:



February 13th, 2009 9:24 am
Ailing Banks May Require More Aid to Keep Solvent

By Steve Lohr / Washington Post


Some of the nation's large banks, according to economists and other finance experts, are like dead men walking.

A sober assessment of the growing mountain of losses from bad bets, measured in today's marketplace, would overwhelm the value of the banks' assets, they say. The banks, in their view, are insolvent.

None of the experts' research focuses on individual banks, and there are certainly exceptions among the 50 largest banks in the country. Nor do consumers and businesses need to fret about their deposits, which are federally insured. And even banks that might technically be insolvent can continue operating for a long time, and could recover their financial health when the economy improves.

But without a cure for the problem of bad assets, the credit crisis that is dragging down the economy will linger, as banks cannot resume the ample lending needed to restart the wheels of commerce. The answer, say the economists and experts, is a larger, more direct government role than in the Treasury Department's plan outlined this week.

The Treasury program leans heavily on a sketchy public-private investment fund to buy up the troubled mortgage-backed securities held by the banks. Instead, the experts say, the government needs to plunge in, weed out the weakest banks, pour capital into the surviving banks and sell off the bad assets. ........(more)

The complete piece is at: http://www.michaelmoore.com/words/latestnews/index.php?id=13400

[ewagner]

1. So......

Is it bad debts or bad portfolios that contain worthless credit derivatives (Credit default swaps otherwise known as CDOs)?

If I understand recent articles correctly, some bank portfolios contained instruments such as these and were recorded as "assets" against which they could lend money to businesses and consumers. In short, there is no value to these "assets" so the credit can't be backed up. The numbers seem to be in the TRILLIONS/

Am I on the right track here?

[jkshaw]

2. They need to be nationalized.

I wonder when we'll hear that this is actually being considered?

[SteveM]

3. An economist on Democracy Now calls them "Zombie Banks." (nt)

[Mika]

4. "...and sell off the bad assets..."

Who's going to buy bad "assets". (And how is something so negative and toxic even considered an asset? DoublePlusGood Brothers and Sisters.)

We've ALWAYs been at war with Eurasia