Consider the above video in light of Chris Whalen’s post today at The Big Picture: Q2 2009 Bank Stress Test Results: The Zombie Dance Party Rocks On
There are some thoughts that Chris presents that are of utmost interest here:
Plain fact is that the Fed and Treasury spent all the available liquidity propping up Wall Street’s toxic asset waste pile and the banks that created it, so now Main Street employers and private investors, and the relatively smaller banks that support them both, must go begging for capital and liquidity in a market where government is the only player left. The notion that the Fed can even contemplate reversing the massive bailout for the OTC markets, this to restore normalcy to the monetary models that supposedly inform the central bank’s deliberations, is ridiculous in view of the capital shortfall in the banking sector and the private sector economy more generally.
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Perhaps there is revisionist thinking at the Fed at long last, but not nearly soon enough to do anything about the impending implosion of the US banking sector in 2010. The significant point to us is not the cost to the FDIC insurance fund implied by the rising Bank Stress Index score, a cost which the banking industry will absorb and repay. But the real point is the permanent diminution of economic activity in local communities caused when good community and regional banks die due to the end-result of bad fiscal and regulatory policies in Washington.
There are a boat load of smaller banks that are being put into crisis through the crowding out effect of government influence with heavy-handed intervention. Sooner or later, either the propped up banks be allowed to fail, or they will cause many more smaller banks to fail. Which would you rather have?
What is going to happen to all the commercial loan demand to refi their expireing loans. The 5 and 7 year ballons are getting long in the tooth and will need replacing. I hear those 4.5% loans will go to 8-9%. Ooch that will bust many equidy spreads. especially when most of these loans we up to 90 ltv’s and now they need to be 60-70 tops.
Oh well!