MEANING:Usually, insolvency is a prerequisite to an application for bankruptcy protection.
Senator Calls On President, Congress To Tell Americans: Our Banking System Is Insolvent
January 22, 2009 (LPAC)--Sen. Bob Corker (R-TN), rose to speak on the floor of the Senate this afternoon during Hillary Clinton's confirmation hearings, but on the subject discussed in the morning on the stimulus package. His message was simple: Our banking system is insolvent, and until that is dealt with, no amount of money we put into the system will work.
While Corker is a staunch "fiscal conservative" ideologically opposed in general to government action, today he argued the following, as monitored on C-SPAN television: We are putting capital into insolvent banks, he said. They are hoarding the TARP money, because they know their losses coming up are much larger than what they have. They are calling in letters of credit, because they need the money.
We are running out of powder to solve problems. Trillions of dollars of capital will be lost in the credit markets; a zombie banking system is being created.
Large banks, banks which we all respect, are insolvent, and need to be seized. Write-downs must be done. The longer we wait, the further we will be from dealing with the root issue.
That root issue is that much of our banking system is insolvent. Assets must be written down to their real value. We do that with derivatives. We need to do that with mortgages. Mr. President, you did not create this problem. But we must tell our people that their banking system is insolvent, he said.
He noted his agreement with Sen. John Kerry's statements in the morning Finance Committee hearings: Talk to bankers on Wall Street. They know they are insolvent. We have to face it like adults. Face up to the insolvency. Face up to these major losses. We have to do something about that first, before doing things that might be helpful after we do this.
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If the banking system is officially declared insolvent by all parties in all forums, will depositors attempt to withdraw all their money at once, closing all banks? What of our everyday economy will be left at the end of that day? Think about it. You will have no money in your bank account, no way to pay any of your bills and no way to withdraw any cash for daily living. You will be limited by cash in your mattress. Checks will be no longer be accepted and worthless as will be credit cards as they are bank backed. Businesses will close immediately when cash inflow stops. The FDIC will be wiped out so you will have no money, period and cannot look forward to any anytime soon. If you receive a social security check, where will you cash it? If it is direct deposit, it's gone.
ReplyDeleteSenators, many of whom are responsible for the economic mess we're in, should be careful about the reality behind idealogical statements they may make. We are paying a great price in the USA for the fact that our Senators and Congressman have no formal training in any of the phases of running our country. Most are out of work lawyers only thinking about reelection.