The tap dance continues

Did you note yesterday that the Federal Deposit Insurance Corporation (FDIC) has indefinitely postponed part of its bank rescue plan acknowledging it can't persuade enough banks to sell their bad assets and clean up their balance sheets? This means banks can continue to put off the day of reckoning for marking down the value of bad loans and finally recognizing the dreck that they underwrote and financed. As long as the banks stand pat, the transaction markets will remain gridlocked and everyone can pretend that their losses may not be as big as they are. The gambit is all about holding out long enough for "recovery" to rescue them.
 
This all puts the lie to bank pr that their capital positions are better than we fear and that they are on sounder financial footing than they really are. It's a big fudge... like heavily sedating an ill patient so they don't feel the pain and putting off the operation to fix the problem.
 
And maybe the economy will come back strong, companies will start hiring again, people will be able to meet their mortgage hurdles, office rents will stop plunging, retailers and malls will be quickly back in business. If we delay long enough, everything will be okay--toxic assets, what toxic assets?
 
In the meantime, most economists see unemployment rising well into next year and home foreclosure rates continue to increase. 
 
The banks just keep tap dancing, while their lobbyists in Washington try to stop regulations that would tamp down on derivatives markets and lending practices, which caused the mess.
 
Oh boy...
 
    

Comments

[Jim Ciotti]

I'm glad someone else has recognized the bull the Banks are putting out, and keeping. They did learn their lesson from the "Thrift Crisis" (another handle for malfeasence in property valuations). They invested more money in lobbying as taught to them by the Pension Funds.
These "Unprecendented Times" we are in will not evaporate unless and until the Banks are forced to dispose of the classifed assets or be closed down.
We actually survived the last "crisis" with new banks springing up and small banks growing to regionals.
Who's got the guts to push the right agenda, me for one! Watch for the GBC developed "American Home Ownership Recovery Program (AHORP) a solution for significantly reducing impending foreclosures and completely eliminating any recidivisms.
This is just one way GBC recognizes it's ability to serve our Country in these unprecendented times..

[TG]

The sooner everyone revalues the sooner we'll get through this mess.

If the banks and other debt holders realize how underwater they are they may even hire some people to fix the problems.

We are on the road to being the top (banana-) republic when government gets involved with "fixing" contracts, lien-holders (Chrysler), even bonus pools (not that I wasn't as upset as the next person but gov't doesn't belong involved in this stuff) Now banks are gaming the system via gov't lobbying (FSB 157, etc.) rather than actually dealing with the problems. Nice.

Don't worry Argentina, we'll be joining you shortly.