World Bank tells G20 finance ministers fix banks before boosting growth

[steven johnson]

Source: The Guardian

The president of the World Bank, Robert Zoellick, warned bickering leaders of the G20 countries that they risked "doing too little, too late" to repair the global economy as finance ministers arrived in Britain for weekend talks.
Amid signs of deep splits between the United States and Europe on how to respond to the most widespread crisis of market economies since the second world war, Zoellick said that cleaning up ­banking systems was more important than ­pumping up growth through tax cuts or spending increases.
"Stimulus packages alone are not enough," the World Bank president said. "The International Monetary Fund research of some 122 financial and economic crises shows that turnaround can't happen unless you clean up the bad assets and recapitalise the banks."
Zoellick has forecast the world economy will shrink by 1-2% this year, and added that difficulties could extend "well into 2010". He said today: "If you don't take on the banking issue, the stimulus is just like a sugar high. It pushes some energy into the system but then you get the letdown unless you reopen the credit markets."


Read more: www.guardian.co.uk/business/2009/mar/13/priority-to-sort-banks-g20-told

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What did causeed the worldwide financial crisis was the writing of credit derivatives, insurance policies for investors. But the funds who bough these credit default swaps did not need to own the securities to buy the insurance. They had to be sold abeoad, though, since this arrangement wasn't legal in the US. About $2 trillion in credit derivatives in 1989 jumped to $8 trillion in 1994 and by last year totaled $596 trillion. Credit derivatives are breaking and will continue to break the world's financial system and cause an unending crisis of liquidity and gummed-up credit.

What Cooked the World's Economy


http://www.pressconnects.com/article/20090313/GETPUBLISHED/903130365

[Odin2005]

1. "Screw the little guy, the banksters need money" FUCK YOU you corporatist clown!

"grr:

[lynnertic]

2. it just might be time for a Jubilee.

[Robbien]

3. The only people around after the banks are fixed will be other bankers

While they pay attention only to bank giveaways, businesses are all going bankrupt and workers are all losing their jobs. The only people around to use those "fixed" banks would be other banks.

Which is I guess exactly what those guys want.

[steven johnson]

4. The Real Problem Is That Many Banks Are Insolvent

Two Bush and Obama administrations have both proposed a plan to buy bad assets to spur lending and restore confidence. This sounds good on paper. But the problem is determining how much to pay for the bad assets. Overpay and the taxpayers are left holding the bag. Pay what the market is willing to bear or fair market value and the banks will have to take a loss. The banks have what is euphemistically called "accounting problems". "Accounting problems" is the politically correct way of saying that the banks are insolvent if the government pays what the current market values are for the securities. If that were not the case, then the government would have started buying bad assets a long time ago. The banks now want to change fair market value accounting rules to hide their insolvency and/or lack of capital from the public. They want to change accounting rules. We will end up with the charade that occurred in Japan until they finally forced the banks to come clean in the 1990s.

http://www.safehaven.com/article-12816.htm">Pet Rocks and Mark-to-Market Accounting

There are a number of versions of "the emperor has not clothes" in the US banking industry. Nouriel Roubini is saying it the most loudly.

"In our assessment, the US banking system is insolvent... they are below the water level", said Nouriel Roubini, professor of the US-based Stern School of Business, while addressing a session on the global meltdown at the India Today Conclave 2009 here on Friday.

According to research, he said, the losses of the US banking system are a mammoth $ 3.6 trillion, with banks accounting for $ 1.8 trillion and pension funds, hedge funds and other shadow banking institutions, the remaining portion.

http://economictimes.indiatimes.com/News/International-Business/American-banking-system-insolvent-says-US-economist/rssarticleshow/4236236.cms

He feels if the banks are not nationalized and cleaned up, the damage will just keep getting worse -- like AIG.

[Bigmack]

5. So we have to go to the Indiatimes

now to get a sense of where the US banking industry REALLY is.... The Dow says it's HEALTHY.....but the realists say.....not. Roubini is an informed analyst, and I tend to take what he says VERY seriously. I wish his opinions were more "cheaply" available, as his website carries a fee for the great unwashed like myself. Oh well, there's always the occasional article, like this one, in the foreign press.... Thanks for these posts - Ms Bigmack