Bill Moyers: Are the Monster Banks on the Verge of Unleashing Fresh Economic Disaster?

[xchrom]

http://www.alternet.org/economy/bill-moyers-are-monster-banks-verge-unleashing-fresh-economic-disaster



***SNIP

SHEILA BAIR: There were a couple things going on. One was it's clear that they were trying to boost their regulatory capital ratios in anticipation of some new capital rules coming into effect. This is a key defect with the way regulators, bank regulators view capital adequacy at these large banks. They let those capital ratios to be determined in part by the risk models of the banks. So if the banks produce models that say, "These assets are safer," it means they can report a higher capital ratio. So it really gives them upside down incentives to manipulate their models.

BILL MOYERS: So for the layman, what is the capital ratio? And why is it so important?

SHEILA BAIR: A capital ratio is simply the percentage of your assets, what's on your balance sheet, the percentage of that that is funded with common equity.

So when banks have a low capital level, that means that they're borrowing a lot to support themselves. Whether it's a household or a big bank, you borrow too much and you don't have enough common equity to absorb losses you-- that's what it means to fail. You start having losses. You don't expect them. You have a very thin capital base. You can't make good on your debt obligations. You fail.

[Newest Reality]

1. I'll have a

super-sized disaster with my capitalism, please.

[marmar]

2. k/r

[woo me with science]

3. Thank you, Bill Moyers.

A beacon of ethical journalism in a field of shills.

[progressoid]

4. Banks don't have low capital.

They are swimming in money. Or at least one major national bank is. An internal auditor from that bank told me "they were flush with money".

[99Forever]

5. Isn't it nice to know..

.. that our benevolent Corporate Overlords are always looking for opportunities to fuck us raw?

Ummmm ...


... yummy fascist flavoring.

[bemildred]

6. That's what they do, isn't it? nt

[redqueen]

7. Yep.

K&R

[woo me with science]

8. K&R

[theKed]

9. "You can't make good on your debt obligations. You fail."

I think we're all well aware that this won't happen. If it takes every last cent of SS and Medicare spending and non-military spending, if they have to squeeze every drop of blood and sweat out of the poor, those banks will not be allowed to fail. USA! USA!

[woo me with science]

10. kick