“Even as CIT Group Inc. teetered near collapse this week, neither the company nor its overlords at the Federal Reserve Board ever backed off their official position that the struggling lender was “well capitalized.”
“Coming from the world’s most powerful central bank, that designation used to mean something about a company’s financial strength and ability to absorb losses. Not anymore.
“Investors watched yesterday as yet another major financial- services company angled for a government bailout — this time unsuccessfully — while still sporting U.S. banking regulators’ highest capital rating. It’s a sure thing CIT won’t be the last.
“By labeling almost all its loans as investments instead, CIT got to avoid writing them down to market values.
“So, for capital purposes, the only difference between an insolvent CIT and a well-capitalized CIT was a mere utterance by management that it planned to keep holding the loans. No wonder so many zombie banks continue to roam the country. All they have to do is wish away their ruin, and the rules let them.“
“Most banks that failed during this crisis were considered well capitalized just prior to their failure.” -U.S. Treasury Department’s 88-page report outlining its regulatory overhaul plans
10:50 US Senator Bunning says FDIC’s Bair said up to 500 more banks could fail – DJ
DJ reports FDIC Chairman Sheila Bair believes up to 500 more banks could fail, a U.S. senator said Bair told him in a recent meeting. “She told us that unless something dramatic happens, we could lose up to 500 more banks,” Sen. Jim Bunning, R-Ky., said Thursday at a hearing of the Senate Banking Committee on the foreclosure crisis. Bunning said Bair made the remarks in a recent meeting. “That means that people who make mortgages in local places …. people that could really help in a foreclosure will not be there,” Bunning said.
“If you can’t be just, be arbitrary.” -an Orange County Traffic Court Judge