Are We Broke Yet?

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ARE WE BROKE YET?….Yesterday, Nouriel Roubini estimated that U.S. banking losses related to the financial meltdown will eventually come to about $1.8 trillion. Of this $1.1 trillion comes from loan writedowns and $700 billion comes from losses on securities. Since current total bank capitalization also amounts to about $1.8 trillion, this “leaves the U.S. banking system borderline insolvent if our loss estimates materialize.”

Oddly enough, I almost find this comforting. First, since this is Roubini talking, this is probably a worst-case scenario. At least we’re only borderline insolvent! Second, U.S. banks are still operationally profitable, which means that by the time all these losses are recognized the system will probably once again have a net capital position of half a trillion dollars or more. Third…..

Well, there is no third — a banking system can’t survive on only a few hundred billion dollars in capitalization. This is pretty sucky news, and obviously it’s suckier for some banks than for other. If Roubini is right it means the mother of all deleveragings still has a long ways to go, and if the Fed and the Treasury agree with his estimates, Citigroup and Bank of America might not have long to live.

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DEMOCRACY DOES NOT EXIST...

without free and fair elections, a vigorous free press, and engaged citizens to reclaim power from those who abuse it.

In this election year unlike any other—against a backdrop of a pandemic, an economic crisis, racial reckoning, and so much daily crazy—Mother Jones' journalism is driven by one simple question: Will America will move closer to, or further from, justice and equity in the years to come?

If you're able to, please join us in this mission with a donation today. Our reporting right now is focused on voting rights and election security, corruption, disinformation, racial and gender equity, and the climate crisis. We can’t do it without the support of readers like you, and we need to give it everything we've got between now and November. Thank you.

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