Word: banking
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...date, U.S. banks have admitted to $334 billion in losses and write-downs, and the final total will almost certainly be much higher. To compensate, they have managed to raise $235 billion in new capital. The trouble is that the net loss of $99 billion implies that they will need to shrink their balance sheets by 10 times that figure - almost a trillion dollars - to maintain a constant ratio between their assets and capital. That suggests a drastic reduction of credit, since a bank's assets are its loans. Fewer loans mean tighter business conditions on Main Street. Your local...
...underlying cause of the Great Depression - as Milton Friedman and Anna Jacobson Schwartz argued in their seminal book A Monetary History of the United States: 1867-1960, published in 1963 - was not the stock-market crash but a "great contraction" of credit due to an epidemic of bank failures...
...credit crunch had surfaced several months before the stock-market crash, when commercial banks with combined deposits of more than $80 million suspended payments. It reached critical mass in late 1930, when 608 banks failed - among them the Bank of the United States, which accounted for about a third of the total deposits lost. (The failure of merger talks that might have saved the bank was another critical moment in the history of the Depression...
...politics, to finish the circle, might end up being more important for future jobs than one would think. A little-noticed provision added to the bailout bill over the weekend would, in five years time, remove the burden of today’s bank woes from the backs of taxpayers and dump them right back from where they came. If the troubled-securities bought by the Treasury Department aren’t worth what the Treasury paid for them, the president must submit a plan to use new taxes to recover the government’s losses from the finance...
...change to the published conference schedule, Cameron appeared on stage the next morning to pledge to work with his Labour opponents to expedite legislation enabling the Bank of England to rescue failing banks. He also promised further protections for bank customers and a concerted attempt to break the vicious cycle reducing banks' ability to lend. And he warned against the partisan rancor that derailed the U.S. bailout. "Let's not allow the political wrangling and point-scoring that we've seen in America to happen here in our own country," he said...