jepittman

Bank Capital: A Looming Problem

Thankfully ALL prices of assets are not falling. Real estate is extremely local in price behavior. In many areas home prices have never declined. In others they have cratered. There is always a demand for credit and banks, given the right incentives, can and will adjust to the new conditions and make loans to qualified borrowers. Local bankers know their markets. If the incentives are right, lending should resume fairly quickly.


On Dec 24 05:17 AM Asbytec wrote:

> Wow, thanks Jep. The latest figures I saw were closer to $600bn.
> Does anyone know how much in terms of toxic debt they need to cover?
> I understand no one knows, and that's part of the problem hoarding
> solves.
>
> As long as home prices fall, jobless claims rise, and banks hold
> toxic debt everyone, including banks, is (are) a credit risk. The
> banks have a tough decision. To lend into credit risk or not to lend
> and lose money. Either way, they lose this catch 22. Banks tend not
> to lend into falling asset values, and asset values won't stabilize
> until lending becomes readily available.
>
> I am afraid Chris is right, it will just have to run it's course.
> Jep, I understand the Fed is trying to pry the banks into lending.
> I hope they succeed. (well, really I hope for a totally new banking
> system and money based on value. But that isn't gonna happen.) It
> could be over in a few months, or it might take longer to get back
> to business as usual.
>
> Personally, I hope it runs it's course and banks and consumers deleverage
> a good bit, first. Let those fiat dollars evaporate a for a while.
> And before we enter another "Greenspan" bubble, let's get some tighter
> regulation on how much money can be made in the derivatives markets,
> this time. Keep the money supply under control with some investment
> transparency.
>
> I suspect one thing is sure. Watch for a break in the credit markets
> before calling this recession done. Some say months. I think longer.