Paulson:Banks need to raise capital quickly

[flashl]

TOKYO, Feb 9 (Reuters) - U.S. financial institutions have to realise losses and raise capital quickly to stave off a credit crunch, U.S. Treasury Secretary Henry Paulson told the Nikkei business daily.

"The worst thing is if they don't raise capital, if they shrink their balance sheet, and then restrain their lending," Paulson said in an interview with the Nikkei published on Saturday.

"If there's any doubt that they will not have enough capital, they should go out and get capital where it is available," he said just before he left Washington for Tokyo to meet Group of Seven (G7) financial leaders.

Paulson also said financial institutions, including monoline bond insurers, must look to the private sector, not the government, to strengthen their capital, denying using public funds to support the banking system.

Reuters

So... Is the Fed's auctions working?

[Nay]

1. Yeah, WTF do those cryptic comments mean? The Fed has been

shoring up everything with borrowed money, running huge cash auctions (which the banks are taking advantage of), etc. Banks HAVE the cash. What banks don't have is solvency, and they are afraid to lend in case they need that borrowed Fed cash to keep their bank afloat for a while longer.

How does Paulson expect insolvent/in trouble financial institutions to "get capital" from the private sector? First, the banks ARE the private sector, and second, solvent institutions will not lend to insolvent ones for the simple reason they will lose their money. I'm sure Paulson means that insolvent institutions should go out and get capital at A HIGH INTEREST RATE, but this does nothing to solve the insolvent institution's problem. Getting capital at a high int rate (because you are risky to lend to) means you have to lend money at an even higher interest rate, to people who already can't afford the lower interest rates of the past few years.

So, I am at a loss as to what the hell Paulson is really saying.

[InkAddict]

2. Maybe he's talking about more Enron-like Raptor derivitives?

Yeah, that worked well.

Attention: Classes at the Chicago School have been cancelled due to a break in the stovepipe.

[Warpy]

3. Apparently the banks agree

I've been seeing a lot more ads on satellite channels for banks and brokerages now than I did six months ago, usually for those I know to be in some degree of trouble for overpurchasing CDOs and other funny money.

"Be a REAL sucker and invest with US!"

[ursi]

4. the part of looking to the private sector makes me think this was the conservatives goal all along

on the monoline bond issue.

[TalkingDog]

5. Bwahahahaha....*snort*... yeah, like that'lll happen.

Board: "Hey, ummmmm.... stockholders, this insolvent bank wants us to lend it, like, a few bucks, you know, just til it gets back on it's feet.

Stockholders: *shank*


And since they've broken the back of the middle class, there's no way in hell any of us will trust them with our money.



My Favorite Master Artist: Karen Parker GhostWoman Studios

[CGowen]

6. tomorrow is the next auction, we will see...n/t