Crocodilian

Coming Soon: Banking Crisis of Historic Proportions

author writes
"We need one hell of a recovery here to prevent disaster. Muddle through will not do it. A return to 3% GDP growth may not do it. We need a couple of years at 4% (or higher) GDP growth to have any chance that some of these banks can earn their way out of the quagmire."
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Some banks _won't_ "earn their way out of the quagmire", but that does not mean that "disaster" necessarily will ensue. The FDIC has been dealing with this long enough that we know the routine: the FDIC has a blank check from the Federals, so we're practicing a "heads you win, tails I lose" public policy.

Failing banks are, today, either taken over by the Federals directly, or sold with a nice check from them to a healthy bank. This will continue.

The net effect?

Dead banks' bad debts become national debt, healthy banks acquire healthy assets on the cheap, even as competition is driven out of the system, and sky high savings rates ensure very cheap capital.

It adds up to unfairness for the taxpayer, and a gift to bank shareholders, but not a crisis.