Whitney: America's banks need to sell "crown jewels"

[Joanne98]

Source: Reuters

(Reuters) - America's banks need to sell their "crown jewels," as they bear the strain of the credit crisis and overextension of balance sheets, Oppenheimer & Co Managing Director Meredith Whitney wrote in the Financial Times.

"A clear lesson learnt from this credit crisis has been to sell and sell early," the prominent banking analyst wrote in an opinion column. "However, it appears as if US banks are setting out to make some of the same mistakes of the past 18 months all over again."

The belief that current prices were too distressed and did not reflect the true underlying value, cost Merrill Lynch and Citigroup Inc (C.N) more than half of their per share capital, she wrote.

"In the case of Lehman Brothers (LEHMQ.PK) and Bear Stearns, capital all but vaporized," Whitney wrote.

She noted US taxpayers became the default investors in banks as a result of the U.S. Treasury's Troubled Asset Relief Programme, which recapitalized the institutions.

"Why should the US taxpayer be forced to fund behavior that he or she would never have the luxury of indulging in," Whitney argued.



Read more: http://www.reuters.com/article/innovationNews/idUSTRE50L14720090122

[Demeter]

1. What Crown Jewels?

they own nothing that anybody would want.

[Baby Snooks]

2. The diamonds and rubies and pearls...

They really don't have any "crown jewels" at this point that they can sell. Banks have "paper" which is the loans the bank has made which they borrow against when they borrow from the Federal Reserve and some of that "paper" can be sold. Few realize when they buy a home that the lender has sold the "paper" before they close. The problem is the "paper" is worthless at this point because of the defaults which are increasing. We are about to get hit with commercial defaults as well as residential defaults. The banks negotiate on commercial "paper" because of the size of the loans while refusing to negotiate on residential "paper." One reason why is corporations tend to file bankruptcy more quickly than homeowners do. And they can "flip" a home more easily than they can an office building or a hotel. The problem is the amount of default. And banks are lucky if they get 50% back on a default at this point because of the overvaluation of real estate. They can issue bonds. Who would invest in them? At this point, for all intents and purposes, our banks are engaged in a gigantic Ponzi scheme. They're borrowing from A to pay B. They reached a point where they needed more than they could borrow. And in came George W Bush and Congress on their white horses to save the banks. The problem is the banks need to cover much more than what Congress has covered. And in some cases more than the Federal Reserve can loan. Our economic system is insolvent.

As for actual assets, the holding companies of banks usually own the assets. When a bank goes under the holding company retains the assets, as opposed to the deposits, which is usually real estate and bonds and other forms of equities. I suspect that is what he is talking about.

When banks go under the rich get richer, the depositors only get what the FDIC insures. The holding companies have the diamonds and rubies and pearls.

[susu369]

3. Please note

Meredith Whitney is a female. Quite an interesting person.

:hi:

[liberal N proud]

4. The whole system is nothing more than a giant paper chase

What are they going to sell? About all they have left is toilet paper

[DUlover2909]

5. We could sell ICBM's. I bet they would go for a ton of cash.

How about we just hold the whole world ransom? Give our banks money or else. Take that Taiwan. Show me the money! :P