What's it going to take for the banks to make it?

Question

What's going to have to happen for the banks to "make it" through everything that is happening? What triggered it? What can make it better?

Answer 1

What triggered it is fairly simple.  Banks offered overly-risky mortgages, largely due to a bubble in real-estate prices.  Now they're facing lots of defaulting loans, and the property securing it has decreased a lot in value.

The US economy depends on a banking system.  It's highly implausible to me that the entire system will self-destruct.  I expect a few more banking failures but I think most banks will "make it through".

I don't know if much more than time would make it better.  Complete honesty in financial reporting would help.  Let investors see how bad it really is.  Some banks seem to have done so, some still seem to be trying to make it look better than it is.  Other than that, time is needed to get the bad loans off the books.

Answer 2

Going back to currency backed by gold will make it better.

Answer 3

The "credit crunch" debacle was triggered in US and UK by leading financial institutions -for that read banks--getting involved in lending in areas outside of their sphere of knowledge and expertise. The defaults in the sub-prime mortgage market in the US has now bitten the lenders--and one tangible result has been a tightening of credit and liquidity to "normal " borrowers as a consequence. The future of the banking sector depends upon rebuilding consumer confidence--however that will take some time to achieve. On the markets, there is widely differing views on whether or not financials stocks are valued fairly or may have farther to fall before they represent a sound buying opportunity!

Disclaimer:

The answers above are for guidance only and should not be acted upon without you receiving independent financial advice relevant to your circumstances.  To find and IFA please call 0800 085 3250 or go to http://www.unbiased.co.uk.

Answer 4

many banks are already 'making it' b/c they didn't allow themselves to get sucked into the subprime mess that idiotic CEOs of some of the larger banks did through poor investments for example, like bank of america's purchase of countrywide , and another bank's purchase of golden west financial.

banks have always needed to pay close attention to the quality of their loan portfolio, and generally have ratios of uncollectable loans to total loans of less than 1.5%.    if you're trying to research individual banks, you can do so on fdic.gov.  you can find all of this info on fdic.gov...the site is amazing.

but banking is a profitable business, and is generally a good investment.  just stay away from some of the messes now like citigroup, bankof america, wachovia, wamu, etc etc.    there are THOUSANDS of healthy smaller banks in america.