Tuesday, February 17, 2009

Great Analysis at Bronte Capital

Wonderful piece over at Bronte Capital on what's really going on in the banking system. I've been getting a lot of email from readers with questions, as well as folks asking me in daily life what's going on. It seems like a lot of people are making a real effort to get themselves educated on what's going on with the banking system and bailouts. That's fantastic.

If you are one of those people, this is a must read article. If you are not, then this quote should get the point across.

"The banks are thus under-reserved on an “held to maturity” basis. Heavily under-reserved. If you were to take correct provisions – many banks – not all but many – would have negative net worth. Few banks would meet capital adequacy standards. Given the penalty for even appearing as if there was a chance that you would not meet capital adequacy standards is death (see WaMu and Wachovia) and this is a self-assessed exam, banks can be expected not to tell the truth.*"