Christopher Whalen of Institutional Risk Analytics spoke to the American Enterprise Institute about the extent of the current foreclosure crisis, how it isn’t just about banks, and how the Fed isn’t helping anything.
0:05 Banks have two issues, legal issues and…
0:40 Banks just can’t handle any more foreclosures; the problem is banks are “muddling along,” slowing doing foreclosures; but this is limiting credit, shrinking banks, and the economy.
1:10 Banks are being turned into REITs, but they don’t have the people, income, or infrastructure to deal with this. Banks need to be restructured, potentially under Dodd-Frank.
1:40 The reality of the real estate bubble bursting is going to come back last year after the year off in 2009.
1:55 The U.S banking industry has a trillion dollars in tangible equity, losses from this real estate scenario could be multiples of that.
2:40 The Fed is keeping rates low, but the banks are keeping all the money, and households are not refinancing. This isn’t trickling down. This is what makes this recession different.
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