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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory
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To: TH who wrote (101072)2/9/2009 10:52:07 PM
From: rich evans  Read Replies (1) of 110194
 
The banks have lost a lot of money. OK. Using a 10-1 leverage ratio for their business model, they need to replenish the capital which they have lost. The government is doing this. The first TARP tranch replenshised their tangible equity from 5% to 10%. But that did not improve their ability to loan as their earned assets/managed assets had to be held steady. So now they have to get more capital to loan out on a 10-1 ratio. They know their assets and can hold them for term instead of selling them to a bad bank at a low rate. The best plan therefore is to do what the treasury and fed are doing. As they increase the liquidity and capital of the bank , more loans will result.

10 mill in car sales takes us back to lee iaccoco days. Impossible to cover manufacturing and employment overhead. And suppliers would then be at 50%. No hope.

Rich
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