Another nice grafic from WSJ:
It obviously becomes clear, that the US government will have to force the banks to sell their good loans. This time it seems that the banks will carry the heavy burden, because if they don’t the credit system will stay clogged like an old shrumpy toilet. This NYTimes article has an interesting summary of the situation. From the article:
Under accounting rules, banks must carry securities on their books at market prices. Most financial firms have already marked down these assets to prices that might be low enough to lure buyers.
But banks need not carry ordinary loans at market value. Instead, they are allowed to hold them at their higher values until they are repaid. So, for many commercial banks, selling loans now, at distressed prices, would almost certainly lead to large losses. Such losses might raise questions about how some banks will fare in a so-called stress test that federal regulators are in the process of applying to about 20
“I don’t see how they are going to get the banks to sell,” said an executive at a large bank, who asked not to be named, given the delicate nature of the Treasury plan. “There are going to be substantial write-downs taken to get them off the books.”
Federal regulators said privately that, in some cases, they might pressure banks to sell.
They will have to force the banks to do so publicly. If they don’t do it the small lenders will suffer even more and the system will go down even more. Specially the banks who took on government money will be forced to do so.
Oh, and just a nice little comparison of deficits. Hit the image to read the article.