Kicking the Can: The Issue of Bank Capital
The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.
NEW YORK (TheStreet) -- In the last quarter century, each and every time politicians have "kicked the can down the road" in order to buy time to protect their banks (with the false hope that there will be a "deus ex machina," i.e., a miracle), the resulting pain is much worse than if the problem had been addressed head on and resolved, even if painful at the time. You can look at this in many ways, including the deficit and entitlement issues in the U.S. But, I am going to limit myself to the financial realm in this particular essay.
Kick the Can: The S&Ls
In 1984, I gave a presentation to a group of senior citizens regarding what I saw as the insolvency of the S&L industry. In social conversations, my wife often recalls the reactions of many of those seniors, many of whom had Certificates of Deposit at S&Ls (back then, interest rates were significantly higher than today's paltry rates). I suspect that the local heart specialists were busier than usual the next day.
Kick the Can: Japan's BanksAt about the same time (1989) Japan's bubble burst. In 2002, then Fed Governor Bernanke, criticized the Japanese approach to their banking issues in a famous speech about how the Fed would not let a Japan style deflation happen in the U.S. Beginning in 1989, the Japanese regulatory agencies did not, and to this day, have not required Japan's banks to recognize the losses on their underwater real estate loans.
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