James Wood

Obama Wants a 'Better Plan'? Here's One: Bite the Bullet

Your question is very legitimate. The commercial real estate market is going into the tank and there is a strong holdover of unresolved mortgage credit in the regional banks. However, the "falling shoe" which most concerns me is the derivatives exposure (particularly the CDS's and interest rate swaps) which are most centered in the big banks, hedge funds, private equity and investment banks. Judging by the FED's actions, it is this type of problem that they are most worried about. If this "shoe drops", we have truly systemic risk to the system and we are faced with a much graver set of circumstances to deal with. In this scenario, the regional banks have a much better chance of surviving without government aid.


On Apr 05 08:42 AM old trader wrote:

> "I would submit if we solved Citi and B of A and maybe Wells Fargo
> and JP Morgan, the FDIC could deal with the rest. We have many strong
> regional banks which will quickly step up to play major roles in
> banking that are not burdened with the enormous problems of the largest
> banks."
>
> Mr. Wood,
>
> I'm no big fan of the current stimulus plan(s), and agree we're at
> risk of our own "Japanese decade" (or worse), but I'm not certain
> how many "strong regional banks" there are to step up to the plate.
> Granted, they avoided getting involved with many/all of the exotic
> debt instruments that plague the bulge bracket banks, but they were
> certainly big players in the CRE market, and that particular shoe
> is looking like its starting to drop.