How The Banks Will Fix Themselves

John Hempton has been blogging for some time about the ability of big U.S. banks to muddle through their current problems and recapitalize via earnings. He put up two posts in the last two days that pulls a lot of his earlier writings together. If you want a blueprint for how the financial crisis is likely to play out read them.

The approach the administration has evidently adopted to solve the financial wreck is pretty much the same that Hempton has been suggesting for some time. Note, however, that his solution only works for very large banks. You don’t have to go too far down the food chain to run into seizure as the only solution for troubled banks. That means there are going to be a lot more community bank failures before this is over.

More: here and here — these are the links to his articles. Try and read them in order.

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About Tom Lindmark 401 Articles

I’m not sure that credentials mean much when it comes to writing about things but people seem to want to see them, so briefly here are mine. I have an undergraduate degree in economics from an undistinguished Midwestern university and masters in international business from an equally undistinguished Southwestern University. I spent a number of years working for large banks lending to lots of different industries. For the past few years, I’ve been engaged in real estate finance – primarily for commercial projects. Like a lot of other finance guys, I’m looking for a job at this point in time.

Given all of that, I suggest that you take what I write with the appropriate grain of salt. I try and figure out what’s behind the news but suspect that I’m often delusional. Nevertheless, I keep throwing things out there and occasionally it sticks. I do read the comments that readers leave and to the extent I can reply to them. I also reply to all emails so feel free to contact me if you want to discuss something at more length. Oh, I also have a very thick skin, so if you disagree feel free to say so.

Enjoy what I write and let me know when I’m off base – I probably won’t agree with you but don’t be shy.

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