60 min piece last night shows how bad it really is for banks.
The stimulus bill sounds very suspicious to me. BO, Reid and Pelosi were in the headlines all last week hollering how critical it was to vote and pass the bill immediately. Sounds like a lot of fraud in it they did not want exposed by giving delegates time to study it. They passed it last week, BUT THE PRESIDENT WILL NOT SIGN IT UNTIL TOMORROW. Again looks suspicious to me.
The estimates as early as last summer on the total losses due to the excessive lending practices were around 1.4 trillion. The best early work came from a highly reputable fund in Switzerland. I think 60 minutes may be a little late with the "news" and maybe a decimal point off.
If the entire economy becomes derailed then BBT gets derailed along with it.
However, the possible saving grace for BBT is that it did not make the loans that were characterized by features such as "no documentation of borrower's income", "no research into borrower's credit history", and "no down payment".
But if BBT has mortgage loans to people for 80% of a house's value in 2006 or 2007 and the borrower lost his/her job, then we have that problem. The combination of job loss and house value loss is a killer.
But a person with the 20% downpayment coming from his/her own $ in a property who is still working probably has enough on the line to keep paying the mortgage and wait, with the rest of us, for inflation to come back and make the house worth what they are paying.
Here's where "mark to market" could come into play for BBT and strangle it. Assume they have 100 units of mortgage loans on the books with some reserve for losses already made. The "stress test" regulator shows up and says "You can't sell your 100 units for what you have them booked at. Take a 30 unit charge." KK says "I don't want to sell them. They are performing. They are worth what I value them at becuse they are current on their payments and will continue that way."
The regulator wins the argument. If BBT gets forced to sell the loans, BBT gets screwed even if KK is right. The purchaser makes the $.
Obama and the stimulus plan have nothing to do with this except to possibly stimulate employment but it won't change the "stress test".