Cool post by Yves over at Naked Capitalism, where he discusses how most banks are toast in spite of the huge capital infusions from the government. The salient point is this:
Repeat after me: you need recapitalization AND price discovery. The near pathological avoidance of the latter by the officialdom would seem to support widespread suspicions that marking assets to market, or even a realistic notion of longer-term value, would confirm that the industry is insolvent.
Price discovery is where you let the market (remember it?) decide, based on supply and demand (remember them?), what a commodity is worth. But what would happen if banks admit that a lot of the paper they hold is worthless and that they are basically insolvent because they are so over-leveraged? Sounds pretty scary to me, but at least we wouldn't by giving the money we're printing to the crooks who got us all in trouble in the first place.
Subscribe to:
Post Comments (Atom)
No comments:
Post a Comment