Fed Chair: No Night of Living Dead Banks

February 25, 2009

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.”

 

USA/

 

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.

 

Bernanke sought to calm fears that government efforts to resuscitate the banking system would create ghouls of the sort featured in the 1968 horror film, “Night of the Living Dead.” In that movie, which was shot in rural Pennsylvania, recently dead people are mysteriously reanimated and go on a macabre rampage.

 

“I think zombie was not an appropriate description of any of the banks,” the Fed chairman said. “I think they all have substantial franchise value, they are all lending, they’re all active, they have substantial international franchise.”

 

Even as the government puts capital into struggling banks to help them lend, it will pressure them to restore themselves to profitability and draw private capital, he said.

 

Photo credit: Reuters/Jonathan Ernst (Fed Chairman Bernanke at Senate banking hearing)

 

 

4 comments

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25 Feb 2009 US policy seem to be living off the world bypushing the dollar thru whatever means. Having issuedtrillions recently US$ should have dropped by 80% againstother trading nations currencies like Taiwan,China,Japan,Korea,Hongkong,Malays ia,India and some others in Europe.But instead is blazing ahead. What a silly world

Posted by jjmk4546 | Report as abusive

the problem that started the banking system failure,was interference by congress telling fannie and freddie to lend to people who could not afford a loan.this is party politics and this can not happen again.both sides of congress have to realize this,and cut out the spin.when other banks saw this they thought they had dispensation to do the same.

Posted by brian lee | Report as abusive

I agree. I believe the only thing holding up the Dollar right now is demand. Every investor and investment bank has been forced out of their equity positions into the Dollar. So demand is high.US consumers are holding on to their money as well. So there is no supply of Dollars, and no demand for goods, so that is what is keeping inflation in check- for now.Once conditions improve somewhat, it will be interesting to see what happens to the Dollar once investors are willing to risk some capital in the markets, and the consumer is willing to spend a little on more than bread and water.

Posted by getplaning | Report as abusive

thats a good sign getplaning we have crossed swords before because of different politics but our commom sense prevails,if obama gets away from the hacks like perlosi and,chuck and the politics before country brigade then people like me will rise up and give him some support.

Posted by brian lee | Report as abusive