Mortgage Meltdown Is History

Did anyone listen to Bill Isaac yesterday? Did anyone listen to the man that was instrumental in solving the banking crisis of 1987-1991 when he was on "Squawk Box?"

I don't think they did. If they did, they wouldn't be nearly as fretful about housing or the bank stocks or the mortgage problem or the toxic bonds as they seem to be, because Isaac talked about 1,600 banks that had to be closed and about how there simply was no place to put the bad assets at all. He talked about major banks collapsing day after day after day, the largest banks in the most important regions in the country. He talked about how hardly a day went by when a bank that they were not prepared to deal with went under because of mortgage loans.

Does that sound like today's situation at all? Does that sound like today, when there are a half dozen institutions wanting a really bad Texas bank, and there were a whole bunch of firms that wanted Colonial (COBK - commentary - Trade Now)? Does that sound like today, when private equity wants in so badly and only asks that it has the same tier-one capital as any bank in the running? Does that sound like today, when you have Spanish bank BBVA that wants to be one of the top 10 banks in the country and wants 10% of the deposits from and might not be that lucky?

I have read and heard endlessly about how the mortgage problem is going to sink us. I am sure that there was a time when it could have; now it is all about who is going to take advantage of the situation.

That's why the stock market doesn't get hit any more. We know that if Huntington (HBAN - commentary - Trade Now) or Fifth Third (FITB - commentary - Trade Now) or Regions (RF - commentary - Trade Now) wanted to buy all the failed banks in their areas assisted by the FDIC with deals like the ones that were done in Isaac's time, ones that worked perfectly, there would be plenty of shareholder money around to do it, plenty more coming through secondaries and the problem would lead to some great investments.

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