The big US banks are technically insolvent. Finance experts say they are like dead men walking, which in itself raises questions about the Obama administration's rescue package.
According to the New York Times reports, Stern School of Business professor of economics Nouriel Roubini, Dr Doom himself, has warned that total losses on loans by American financial firms and their falling value will reach $3.6 trillion. That's up substantially from his previous estimate of $2 trillion.
Writing in the Washington Post , Roubini says the only answer is to nationalize the banks. Once you do that, you separate the assets into bad and good ones, and get rid of the bad ones. Roubini says Obama's plan is a step in the right direction but that it makes the fateful mistake of assuming the banks are solvent. Trouble is, how much does the US Government pay to buy the banks? That's still anyone's guess.
If the large banks motgage portfolios were ‘marked to market’ values, and the liabilities of the credit derivative contracts were posted to balance sheets, it appears that all the big banks, and big investment banks liabilities markedly exceed thier assets. The banks should be nationalized, and the sham of offering their stock for sale to the public by the stock market suspended immediately.