Yes, and the Federal reserve brought in many people last year - like Bill Gross of Pimco, and other traders and academics - to try to understand how things work now.
I don't think this will be the end of the housing slump, but we may be close to the end of large financial institutions blowing up. We may also see the start of credit becoming available again, first to solid companies, then to other banks, then to the average company, etc.
Banks and other financial institutions have been increasing loss reserves, which means they stopped paying taxes last year. The are making good money on all loans that are current, are using the iffy loans as collateral for borrowing from the FED, and are in the process of selling off many bad loans to pension funds, insurance companies, and vulture funds.
Additionally, they have been raising capital.
So the money is starting to pile up at banks.
Once the rate at which retained earnings are growing is higher than the rate of loans going bad, the risk of insolvency drops rapidly. |
