It's all about the question marks. Calculated Risk
Just catching up to a great take on banks' balance sheet problems from Calculated Risk.
They take the next step with our simplified chart of a balance sheet, making room for toxic legacy assets on the left. And then there are the question marks:
These "??????" assets are either future retained earnings or additional money from the government. Although the bank is balance sheet insolvent, the bank will never be business insolvent because the government will continue to provide money to cover losses.
What Treasury Secretary Geithner is doing right now "is known as the 'Zombie' bank approach," the site says. And maybe that's okay, Calculated Risk argues, provided enough healthy banks remain to pull the economy along. But with Citigroup and Bank of America comprising 40 percent of the U.S. bank system, the zombie scenario is not so comfortable.
categories: Understanding The Crisis
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