I've said it before, and I'll say it again: When the Wall Street Journal Describes Finance With Cartoons, it Means that Someone will Get Boned, and it ain't the "Bankers, Lawyers, and Other Advisers."
Once again, regulators have allowed banks to slice and dice loans in order to improve appearances on their bottom line:
In an interview, Joe Exnicios, chief risk officer of Whitney's Whitney National Bank unit, of New Orleans, cited a hypothetical example in which a developer borrows money to develop a small retail center and gets a drugstore chain to sign a lease for one store. If the developer can't sell the other sites, he would be unable to repay the loan. Under the new guidelines, the bank could create a healthy, performing loan supported by the drugstore lease and a nonperforming loan from the rest of the loan. "It may make a difference on whether you need to have additional capital and take additional reserves," he said.(emphasis mine)
Critics agree that regulatory flexibility might help some banks avoid failure. But the troubled loans remaining on their books will discourage them from lending, reminiscent of Japan's "lost decade" in the 1990s.
A better solution, critics said, would be similar to the approach regulators took during the commercial real-estate crash of the early 1990s.
"Back then, regulators moved aggressively to force banks to take write-offs and sell off their troubled loans, and the market recovered faster," said Mark Edelstein, head of the real-estate group at law firm Morrison & Foerster LLP.
I will note that Mike "Mish" Shedlock, with whom I frequently disagree,* gets it right in his hed, "New Rules and More Lies Hide Cancerous Commercial Real Estate Loans.
The problem here is that Barack Obama and His Stupid Minions™ are asking the wrong question. Instead of asking, "How do we get capital flows moving again," they are asking, "How do we save the banks."
These two things are orthogonal.
*Like he gives a damn. I'm just a loud mouth with a blog.
0 comments :
Post a Comment