Could someone enlighten me as to how an impairment in collateral value of 45 to 55 per cent results in a 0.8% loss factor? Are any of these institutions remotely solvent?
Most banks are sitting on losses they are not disclosing because they don't have to - they only time they are forced to truly mark a loss is when they truly sell an asset at a loss, everything else has wide discretion... thus yes, they are in varying degrees of insolvency, or at least in much worse shape than they report. Plus as long as they hold securitized assets predicated on this, or similar collateral, they can mark those assets at almost any level they feel like (since the FASB allows non-liquid securities to be marked at the discretion of the holders), which has the effect of creating an average value higher than it should be given the declining loans. Does the fed get this? no - they are doing the same thing with the bank assets they hold.
7 comments:
I wonder how US Century Bank is holding up. Alright, I guess, so long as they put full page ads in the Miami Herald.
This is why, btw, I call the economic crisis a "time-release depression".
US century has lost a star in a short period of time on Bauerfinancial. It is watched by this blog.... Our concern: Are banks personal piggy banks of the big wigs on their boards.
Reality was allowed to prevail in the cases of Lehman Brothers and Bear Stearns. But all of the bigs were insolvent in October 2008. They died. They exist now as "zombies" given the appearence of life by Treasurers Hank Paulson/Tim Geithner and FED Chairman Ben Bernanke.
The "toxic assets" they used to hold were transfered to the US governments balance sheet and Fannie and Freddie. Bernanke fired up the printing presses, and let the banks borrow newly minted money for free and invest it in equities and interest bearing T-bills and the like.
The banking casinos were allowed to reopen and they've gone back to trading the derivatives like collateralized debt obligations and credit default swaps. And they are laundering drug money from cartels around the world. The US military will not touch the poppy fields in Afghanistan. The banks won't allow it.
A little more time for the banks will finally materialize for all of us, the people, in a sovereign debt crisis that will bankrupt and destroy the United States of America.
Bill Gross, PIMCO, just kicked over the bond business. Not good news for Miami, or, the reputations of our public officials who believed the only purpose of rainy day funds is to plunder them.
You want banks to write down all their losses now? The 4 biggest banks in the US have, for example, a certain amount of second mortgages that have a market value of zero (home prices have dropped on average more than 20%) but a face value of more than 1.5 times those banks' total cash-on-hand. So just marking to market one category of the banks' many devalued products (not counting regular mortgages, credit cards, commercial loans, business loans, etc.) would instantaneously bankrupt them far beyond anything the FDIC has the capacity to handle. So you want to cause US households to lose their savings?
Well that shut everyone up.
Post a Comment