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Bank of America Corporation Message Board

  • dwsabra dwsabra Nov 26, 2011 9:57 AM Flag

    Last Bank Crisis was Banks fault - this one is Govt

    The last fiscal crisis was created when the banks created risky derivatives on financial assets and everyone wanted a piece of Credit Default Swaps and Mortgage Backed Securities. This crisis is because the governments are now refusing to pay bondholders (mainly banks and other large financial institutions) the money the banks loaned to them.

    Nobody ever really ever thought a country would default. After all, they can tax their people to pay off the note. Not a bad assumption and the banks were eager to transfer some of the small small risk again by paying a small fee to help insure the debt in the unlikely event of a country not paying off the bond....The other banks pocketed the fee and assumed some of the risk. And now here we are with Greece telling bond holders to take 25 cents on the dollar and the banks will all be looking at each other to cover the loss.

    And now the govt's are telling the banks they need to raise capital because the assets on their balance sheets may be impaired...because the govt is not paying them back. What a world.

    What is a bank to invest in if it cannot (a) loan money to govt and collect interest (b) loan money to people to buy things? Tough business to be in.

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