These excerpts from the most recent TARP Congressional Oversight Panel Report make the risks in the US financial system abundantly clear.
Do you think that the Congress has the will and the ability to act on their recommendation, with the men currently in positions of power on the key Committees? Do you believe that the Obama Administration is capable of reforming itself and effecting genuine change with so many Wall Street denizens forming their policy?
"In order to advance a full recovery in the economy, there must be greater transparency, accountability, and clarity, from both the government and banks, about the scope of the troubled asset problem."
We are persuaded that the government is waiting for the next wave of failures, or some exogenous event of catastrophic proportion, to provide their rationale to take new aggressive action.
But while the financial oligarchy is in control of the men in power, we doubt that these will be the right steps for the majority of Americans, the US economy, and its debt holders.
"There are a thousand hacking at the branches of evil to the one who is striking at the root."
Henry David Thoreau
Congressional Oversight Panel - August 11 Report - The Continued Risk of Troubled Assets
"...But, it is likely that an overwhelming portion of the troubled assets from last October remain on bank balance sheets today.
If the troubled assets held by banks prove to be worth less than their balance sheets currently indicate, the banks may be required to raise more capital. If the losses are severe enough, some financial institutions may be forced to cease operations. This means that the future performance of the economy and the performance of the underlying loans, as well as the method of valuation of the assets, are critical to the continued operation of the banks.
...If the economy worsens, especially if unemployment remains elevated or if the commercial real estate market collapses, then defaults will rise and the troubled assets will continue to deteriorate in value. Banks will incur further losses on their troubled assets. The financial system will remain vulnerable to the crisis conditions that TARP was meant to fix.
...Part of the financial crisis was triggered by uncertainty about the value of banks' loan and securities portfolios. Changing accounting standards helped the banks temporarily by allowing them greater leeway in describing their assets, but it did not change the underlying problem. In order to advance a full recovery in the economy, there must be greater transparency, accountability, and clarity, from both the government and banks, about the scope of the troubled asset problem. Treasury and relevant government agencies should work together to move financial institutions toward sufficient disclosure of the terms and volume of troubled assets on institutions‟ books so that markets can function more effectively. Finally, as noted above, Treasury must keep in mind the particular challenges facing small banks.
This crisis was years in the making, and it won‟t be resolved overnight. But we are now ten months into TARP, and troubled assets remain a substantial danger to the
...Nonetheless, financial stability remains at risk if the underlying problem of troubled assets remains unresolved."
The banks must be restrained, and the financial system reformed, and the economy brought back into balance, before there can be any sustained recovery.