Welcome to the Vitus Capital Blog!
Notes to myself, possibly of interest to others.
-- Bill Northlich

Monday, January 4, 2010

Why are banks struggling?

Banks are eager to pay off their TARP money to avoid compensation limits but also with the confidence that if they fall into problems again, they are too big to fail and Uncle Sam has already established the ‘bail out’ precedent. Nobody seems to notice that of the $7.4 trillion of U.S. banking sector assets, there are still some $346 billion that are classified as “Level 3” illiquid loans or the equivalent of their entire core capital level. According to the Economist, these loans are being carried on the books at a $76 billion premium to ‘fair value’, suggesting that we are nowhere near close to achieving true price discovery.

---Op. Cit.

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