The New York Times is reporting Large Banks on the Edge of Insolvency
Economist Roubini has been screaming from the hill tops on nationalizing the banks and now other economists are chiming in.
Mr. Roubini’s numbers may be the highest, but many others share his rising sense of alarm. Simon Johnson, a former chief economist at the International Monetary Fund, estimates that the United States banks have a capital shortage of $500 billion. “In a more severe recession, it will take $1 trillion or so to properly capitalize the banks,” said Mr. Johnson, an economist at the Massachusetts Institute of Technology.
At the end of January, the I.M.F. raised its estimate of the potential losses from loans and other credit securities originated in the United States to $2.2 trillion, up from $1.4 trillion last October. Over the next two years, the I.M.F. estimated, United States and European banks would need at least $500 billion in new capital, a figure more conservative than those of many economists.
Still, these numbers are all based on estimates of the value of complex mortgage-backed securities in a very uncertain economy. “At this moment, the liabilities they have far exceed their assets,” said Mr. Posen of the Peterson institute. “They are insolvent.”
and guess what type of structure is being recommended? A Resolution Trust Corporation.
This is what in part what was proposed and ignored by Progressives about $400 billion dollars ago.