Reconocen cada vez más que el sistema bancario está insolvente

December 17, 2007 (LPAC) – This Summer, while others were talking about a "subprime crisis" which they claimed could be contained, Lyndon LaRouche said that the global financial system itself had collapsed, that the whole system, including the banking system, was insolvent. Several failed government and central bank interventions later, more and more people are beginning to admit that the system itself has failed. We present a survey of some of the more striking public admissions in recent days:

David Ignatius, Washington Post, Dec. 16: The coordination action by the central banks "is a sign of their nervousness.... The aim isn't so much to prevent a downturn – the bankers aren't sure that's possible, or even desirable – as to mitigate its effects.... What scares the central bankers now is the evaporation of trust from the system. Banks don't believe each others' numbers; since nobody knows the real value of some of the mortgage-backed securities everyone is holding, they assume the worst."

Ignatius said one prominent hedge operator had stayed out of the market the day the central bank bailout was announced, because he wasn't sure what do to, as trades which looked sensible at 10 a.m. would have turned out to be mistakes by noon. What the trader really wants is out, he admitted "If someone would take me out of all my positions, long and short, I'd take it," he said.

Washington Times editorial, Dec. 16: The actions being taken by the central banks "leave no doubt that their policy-makers believe times are desperate. Indeed, the worldwide liquidity/solvency crisis has worsened in recent weeks... fear and panic have engulfed the markets.... Given that nothing so far has alleviated the stresses in the financial markets, there is no certainty that the desperate efforts being undertaken by the world's largest central banks will be sufficient. These are, indeed, desperate times."

Wolfgang Munchau, Financial Times, Dec. 16: Rather than reassuring the markets, the central banks' actions "had the opposite effect. It turned out that market participants are not infinitely stupid. They know by know that this is not a liquidity crisis at its core.... It is a fully fledged solvency crisis that has arisen because two giant and interlinked bubbles burst simultaneously – one in property, one in credit – leaving banks and investors on the brink of bankruptcy, some hanging by their fingertips. Yet there is nothing the central banks are offering at this stage to alleviate a solvency crisis. So the message from last week is that central banks have no game plan."

Anatole Kaletsky, Times of London, Dec. 17: The central banks' actions is "likely to be just the precursor to a much more important, but controversial, operations to ensure the 'solvency' of the international financial system. The distinction between the problems of illiquidity and solvency, which looks like the next challenge for monetary authorities around the world," is illustrated by Northern Rock, which "looked initially like a liquidity crisis" but has now been revealed as a "solvency problem." "The hope since last summer has been that the process of establishing a new lower value for mortgage assets would take until the year-end, after which the banks that were severely hurt would raise capital from investors and return to normal operations next year.... this assumption was over-optimistic... the summer liquidity crisis has been turning into a loss of confidence in the long-term solvency of the global banking system banks."

The only way to stop this "vicious circle" is for banks to convince investors that their year-end books "offer an honest picture of their potential losses and new capital needs." Failing that, "governments will almost certainly have to intervene directly to put a floor under mortgage values, thereby underwriting the solvency, as well as the liquidity, of banks.... If the banks, their auditors and shareholders, cannot quickly do this, then government intervention will become inevitable to underwrite the solvency, as well as the liquidity, of the banks."

John Waples, Times of London, Dec. 16: "This is the worst financial crisis since 1972," said the chairman of one of the biggest British banks in a "deeply disturbing" off-the-record conversation. The $100 billion bailout from the central banks would not be enough, he said. A lot of the companies bought over the past two years are no longer worth what they were acquired for, which will lead to further write-offs from banks.

Roger Bootle, Daily Telegraph, Dec. 17: "At the bottom of this question lies the distinction between liquidity and solvency, and the links between the two.... a liquidity crisis can arise from irrational fears and herd behavior... [and] Such a general liquidity crisis can then cause real economic difficulties. In the financial world banks can be pushed to the edge of insolvency, or beyond... the central bankers can lend money until they are blue in the face but it will not deal with the fundamental problem. The fundamental problem is lower asset values."

"Banks provide the lifeblood of the economy – credit. So when the banking system is damaged the impact potentially spreads across the economic system as a whole. It is the equivalent of shutting down the electricity supply.... That is why, at key points in financial history, governments have had to step in and effectively nationalize banks. And it is why, in structuring a financial recovery, bad old debt has to be separated from the continuing business of new lending.... The current situation has the makings of one of those major economic events which, like the ERM debacle, not only wreak havoc in the financial system but alter the lives of millions, break reputations, reshape institutions and overturn the political consensus."

Gillian Tett and Paul J. Davies, Financial Times, Dec. 16: Parts of the "hidden world" of banking are "imploding" -- the plethora of off-balance-sheet SIVs, CDOs and other vehicles which have never been part of the "official" banking system but are one of the "key causes of the turmoil." The role of this "'shadow' banking system" has expanded rapidly in recent years, allowing banks to package their loan portfolios into bonds and move them off their balance sheets, and this shadow system "is now shrinking at an even faster rate than it grew."

"What we are witnessing is essentially the breakdown of our modern-day banking system," said Bill Gross, head of Pimco, the world's largest bond fund.