They won't stay dead!
Members of the U.S. Senate grilled Federal Reserve Chairman Ben Bernanke on Tuesday on whether the next gruesome episode in the U.S. economic horror show could include an appearance of “zombie” banks.
During Japan’s economic stagnation in the 1990s, the government propped up failing banks and firms that came to be known as zombies. The failure to let such institutions expire prolonged Japan’s agony, many analysts believe.
Now that the U.S. government is struggling to keep the banking system alive, Senator Bob Corker worried aloud that the government is propping up banks that deserve to die.
“It seems to me that -- that this has been creating this sort of dead man walking sort of zombie-like banking scenario,” Corker said at a hearing with Bernanke. “It seems to me that what you have explained is a creeping -- a creeping nationalism of our banks. I mean in essence, many of them don't have appropriate capital.”
Banks which the government determines don’t hold adequate capital will receive public funding to meet that capital requirement just to keep them going, he argued.