ETFnerd

Clock is Ticking for Banks With Asset Quality Issues (Part II)

Banks are in a world of hurt and will continue in that place for a while. Because investors in the market decided to close their eyes to being sold garbage because they were making money doing so, banks and unregulated lenders threw their underwriting standards out the window in order to churn out garbage in ever increasing quantities. The result is that investors don't trust the banks' underwriting any longer and refuse to buy any more garbage. In fact the baby gets thrown out with the bathwater, and investors refuse to buy regardless of whether the product is garbage or not. Thus we have the current liquidity crisis.

I think the question is not whether the banks have little time to right their business. That is only a concern for investment bankers like yourself wanting to sell these services to these banks so that they may be able to survive even if in moribund fashion. The real question is when will the banks regain their credibility with the buyers of their wholesale products. That ship is sunk and it's time to build a new one from scratch.