Some of the large banks in the USA may require more aid to remain solvent, say some economists and other finance experts. This is a sobering commentary on the growing mountain of losses that can overwhelm the value of the banks’ assets.”The United States banking system is effectively insolvent,” it quoted Nouriel Roubini, a professor of economics at the Stern School of Business at New York University, as saying. He estimates that total losses on loans by USA financial firms and the fall in the market value of their assets will reach US$3.6T, up from his previous estimate of US$2T according to the New York Times last week.
U.S. Treasury Secretary Timothy Geithner unveiled a plan last week to soak up as much as US$1T in bad assets on banks’ books and expand a Federal Reserve program to support up to US$1Tin new loans. The market yawned and rolled over as experts said that in order for the US banks to resume the ample lending needed to restart the wheels of commerce, bigger, and more direct government role than in the Treasury Department’s plan called outlined. The government needs to really get in and close the weakest banks, inject capital into the surviving banks, and sell off the bad assets sooner rather then later.
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