After three articles in four days on the FDIC, banks, and what sure looks to me like a willful refusal to enforce the law over a period of more than two years, it appears time to once again talk about what should be done in the banking and regulatory systems.
I continue to return to my "roots" in this regard: transparency good, accounting clarity good, game-playing and book-cooking bad.
"Too big to fail" and "bailout nation" have become a bad excuse for accounting games, willful regulatory misconduct and accounting fraud.
We have far too many "walking dead" banks that under any reasonable interpretation of PCA should have been closed months or even years ago. Indeed, The Market Ticker began publication precisely because of the accounting games at Washington Mutual (formerly NYSE:WM) where it was paying out dividends in excess of its cash earnings, effectively trying to claim that "capitalized interest" booked on dubious loans in a declining market were actual money. Regulators should have demanded that WaMu suspend dividends in the spring of 2007 and seized the firm if it was unable to correct its deteriorating asset performance within months, rather than effectively allowing the bank to collapse in the fall of 2008.
Loss ratios against asset bases being absorbed by the FDIC when banks are seized over the last two years are not an accident or a reflection of the times - these losses are occurring due to willful, deliberate malfeasance throughout our banking regulatory structure, including The Fed, OTS, OCC and the FDIC itself, all of which have adopted "extend and pretend" as an operating mantra in direct and willful contravention of the Prompt Corrective Action law.
We will not find a durable economic and financial bottom until I and everyone else can once again read a set of financial statements and expect that the numbers printed on the page actually represent the firm's financial condition.
After ENRON and the debacle from The Tech Wreck you would have thought our regulatory agencies would have learned that nothing good comes from trying to sweep insolvency under the rug; that only multiplies losses. Instead we have not only had to suffer the insult of hundreds of billions of dollars in taxpayer-borne loss, but also active complicity and willful misconduct of our government that has once again sat back and watched firms with severely-deteriorating asset bases continue to claim that "everything's fine" while the fire that began with the curtains spreads to the ceiling and the room fills with smoke.
Where We Are, Where We're Heading (2013) - The annual 2013 Ticker
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