Is our banking system still on verge of collapse?

[kentuck]

I recall that just a few months ago, George W Bush and Henry Paulson came before the American people to tell us that our entire economic system was near collapse. They said they needed $700 billion dollars immediately to save the banking system. The entire world panicked. The stock market sank like a rock from the 14,000 of the previous year. Nobody knew what to do.

Are we now out of the woods? Can we now return to politics as usual? Can we forget how close we came to total economic collapse? Has our capitalist system been rescued by another Democrat once again?

Are we in better shape than when Bush came out to say "we are fucked" and "goodbye"?

The Republicans are once again calling for taxcuts and freezes and cuts on spending? They obviously believe that we are out of the woods and they are ready to get back to their old game. Do the people of America really have that short of a memory?

[cliffordu]

1. Mmmmm... ..... yep. we are screwn

[ixion]

2. banks have yet to write down the value of their assets

until then, assume that they are insolvent.

[Turbineguy]

3. The banking system is always

on the verge of collapse. Expect this to continue until executive bonuses are paid.

[Turbineguy]

8. In order for the banks

to make profits and put out loans at low interest rates, they have to be highly leveraged. In this situation they were able to do all three by disregarding or miscalculating risk.

[Warpy]

4. Short answer? yes.

While the bailouts shored up asset columns to allow them to stay open last fall, they didn't provide enough to compensate for all the bad paper out there to allow them to stay open long term.

Part of the problem is that the banks don't know how much of the paper is bad since so much of it represents bits and pieces of hundreds of loans, some of which are good and some of which are bad. The paper was so exotic that nobody knows what most of it is and there's no way to track it back.

Long term, the banks might need to be nationalized to keep them open.

[Greyhound]

5. Yes, but the confidence scheme is gaining ground and will almost certainly work.

Just like the Realty Assn. adverts say, "If you're (still) in a position to buy a house, now is an opportunity to invest in your future".

It's all in convincing enough people to put their money back into the hands of the thieves.

[Badgerman]

6. Only work for the short term! n/t

[aquart]

7. Yes. Next question.