Tuesday, January 27, 2009

Bill Seidman: Tough Stance Needed Against Banks

[Post Summary]

I sat down in his shade with great delight
Song of Solomon

* * * * *

Former FDIC Chairman, Bill Seidman, interviewed this evening by CNBC's Dylan Ratigan, added his voice to the chorus opposed to extending any appearance of legitimacy to worthless assets banks presently hold on their books. Seidman's remarks were prodded by tonight's rumor involving the formation of a "Bad Bank" tasked to absorb trillions in securities currently dogging the global financial system.

From my perspective the question is fast becoming whether all the tough talk coming from the likes of Bill Seidman, Senator Bob Corker (R-TN) and Senator John Kerry (D-MA) is so much political posturing lacking any intention to act in kind. This might, in fact, prove true in the end. Yet that the banking system's insolvency has moved into the light of day at such time as legislative initiatives targeting this vulnerability are being debated is, itself, a positive step in the right direction.

Overhanging the debate must be the matter of peril facing the U.S. Treasury as a consequence of delaying the inevitable massive writeoff of private-label credit securities that never should have been created in the first place. Odds are, however, this consideration will receive no public airing whatsoever, although it probably should.

Time surely is coming when the capacity of this once prosperous nation to honor its Treasury's debt will become an open question whose uncertain answer not only will reek havoc on the daily lives of citizens, but will raise tensions with those nations which up to now have been its willing creditors.

The pressing question right now is how long will the Congress continue attempting to manage its way deeper into a fog, knowing its inevitable lifting is certain to leave the People little choice but default?

—Tom Chechatka

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