Washington Babylon — January 26, 2009, 8:32 am

Another Bailout for Big Banks?

The Institutional Risk Analyst looks at the “political battle building for the mind of Barack Obama on how to resolve, or not, the largest, most profoundly troubled US banks.”

The term “bad bank” is being tossed around Washington dinner tables this week, a sign that the situation facing the largest banks is reaching a boiling point. It is amazing to us to see how little people understand the choices facing us with the big banks, how narrow those choices truly are and how the numbers in terms of losses are so BIG that they will ultimately force us to do the right thing. A couple of points:

First, IRA’s estimate for accumulated bank charge offs for 2009 is in the neighborhood of $1 trillion vs. $1.5 trillion in Tier 1 Risk Based Capital at all US banks today. Good news, though, is that 2/3 to 2/4 of that loss number comes from the top 4 – Citigroup, Bank of America, JPMorganChase and Wells Fargo, in that order of risk profile…

The Good Bank/Bad Bank debate is really a political battle between the large banks listed above plus Goldman Sachs and Morgan Stanley et al among the Sell Side survivors in NYC vs. the rest of the industry and the US economy. In preparing their plans for review by the White House, we hear that the Fed and OCC are supporting further bailouts for the larger banks, while the rest of the industry is being resolved and recapitalized a la Washington Mutual and Lehman Brothers…

Remember that the entire banking industry stands in front of the taxpayers in terms of loss absorption at the FDIC, so you can understand why the smaller banks in the industry are SERIOUSLY PISSED OFF at the large banks and their minions in the Obama Administration like Tim Geithner and Robert Rubin. Oh, and don’t forget Chairman Ben Bernanke and the entire Fed board of governors. These leading officials are increasingly talking the heside of the large banks in the battle over limited financial resources, a fact that is causing the community bankers to rise in anger.

Share
Single Page

More from Ken Silverstein:

From the November 2013 issue

Dirty South

The foul legacy of Louisiana oil

Perspective October 23, 2013, 8:00 am

On Brining and Dining

How pro-oil Louisiana politicians have shaped American environmental policy

Postcard October 16, 2013, 8:00 am

The Most Cajun Place on Earth

A trip to one of the properties at issue in Louisiana’s oil-pollution lawsuits 

Get access to 164 years of
Harper’s for only $45.99

United States Canada

CATEGORIES

THE CURRENT ISSUE

May 2015

Beyond the Broken Window

= Subscribers only.
Sign in here.
Subscribe here.

In Search of a Stolen Fiddle

= Subscribers only.
Sign in here.
Subscribe here.

Displaced in the D.R.

= Subscribers only.
Sign in here.
Subscribe here.

The Quietest Place in the Universe

= Subscribers only.
Sign in here.
Subscribe here.

Black Hat, White Hat

= Subscribers only.
Sign in here.
Subscribe here.

view Table Content

FEATURED ON HARPERS.ORG

Article
Displaced in the D.R.·

= Subscribers only.
Sign in here.
Subscribe here.

“How is it possible that my birth certificate is invalid if I was born here?”
Photograph by Pierre Michel Jean
Article
The Quietest Place in the Universe·

= Subscribers only.
Sign in here.
Subscribe here.

“Gaitskell and his colleagues are approaching the revelation of a new order, a new universe, in which even light will be known differently, and darkness as well.”
Painting by Sebastiaan Bremer
Article
The Test of Time·

= Subscribers only.
Sign in here.
Subscribe here.

“One by one his books dismantle the idea that art consoles, that art contains truths, that art expresses the soul. He insists on the artificiality and createdness of his narratives.”
Article
Saving the Whale, Again·

= Subscribers only.
Sign in here.
Subscribe here.

“While the other Wall Street behemoths are currently tapering their derivatives trading, Citi has been expanding its own.”
Illustration by Ross MacDonald
[Browsings]
On Broadway·

= Subscribers only.
Sign in here.
Subscribe here.

Photograph by the author

Chance that an American would give up at least one week of life to avoid taking a pill every day:

1 in 3

Iowa urologists reported that only a minor portion of locker-room teasing arises from “the presence of excess foreskin”; most teasing targets small penises.

A pair of Russian film directors asked President Vladimir Putin to invest $18 million in a new restaurant chain intended to drive McDonald’s out of the Russian market. “Every project these days,” a Russian television personality said of the proposal, “must be smothered in patriotic sauce.”

Subscribe to the Weekly Review newsletter. Don’t worry, we won’t sell your email address!

HARPER’S FINEST

Subways Are for Sleeping

By

“Shelby is waiting for something. He himself does not know what it is. When it comes he will either go back into the world from which he came, or sink out of sight in the morass of alcoholism or despair that has engulfed other vagrants.”

Subscribe Today