More on Risk Management
Here’s a simple reason why the bailout can’t work: if a business truly needs a loan to stay in business (as opposed to making a strategic investment), no bank is going to lend that business money. It doesn’t matter what a bank’s balance sheet looks like.
We are going through a period of deflation. Asset prices are falling (stocks, homes), and debt destruction is underway (the two are not unrelated). Even if you take the current crap off of banks’ balance sheets, the banks will not loan out of fear that their non-crap assets will become crap.
