Some Highlights from the 256 page report.
Moreover,
the risk of a more severe adverse feedback loop
between the fi nancial system and the broader
economy represents a critical threat.
IE We face the chance of a complete financial meltdown
As fi nancial institutions attempt to delever and
reduce risks, their willingness and ability to
continue extending credit has been curtailed,
resulting in a tightening of monetary and fi nancial
conditions. The pressure to reduce leverage
and risk has also had a pronounced impact on
nonbank fi nancial institutions, including hedge
funds and other leveraged entities, leading to
the demise of the independent broker-dealer
model. Exacerbated by the adverse feedback
loop between the fi nancial system and the real
economy, credit supply constraints could persist
for a prolonged period.
The more they lose the less they will have to loan. All other non-financial companies will be in a more strained postion on a going foward base.
Funding in interbank and commercial paper
markets have locked up with mostly overnight
rolls and little to no term activity, refl ecting
persistent and increasing concerns about counterparty
credit risk and future liquidity needs
All that money dump in and nothing is coming out. Whoops.
The deleveraging process may continue past.
the end of the decade
2010, ouch
Indeed, the likelihood of
offi cial intervention in less viable banks may, in
some cases, have accelerated the downward pressure
on equity prices of other banks struggling
to delever or absorb the economic downturn.
IE if the goverment says your name you are toast.
Mounting credit losses could result in further bank
solvency issues, potentially stretching deposit insurance
resources.
More losses are coming and the FDIC is underfunded.
Macroeconomic shocks with the potential to
trigger a sharp market correction, given existing
conditions in capital markets
The swam waits to flap its wings and bring the world to its knees.
Changes in, and perceptions of, credit quality
that have the potential for creating losses resulting
in stress to systemically important fi nancial institutions
IE if you are not rock solid and with no debt, forget about it.
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