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This is a grim bit of analysis from Mike Allen's Playbook:
An oft-quoted investment banker e-mails us: “There is no capital in the entire global financial system. None. When I say ‘financial,’ I mean banks, hedge funds, private equity funds, homeowners and other leveraged players. There is some capital among the ‘real money’ players such as sovereign wealth funds and central banks. And the U.S. can ‘print’ some. But that's it. … The problem with the distressed assets is not that there are no buyers. There are plenty of buyers; I speak to them every day. The problem is there are no sellers; that is, the banks won't sell. Because to sell is to book a loss on what you have sold and what remains. And to do that is to die. That's what it means to be insolvent.”Just to clarify those last sentences: The banks bought the bad assets at high prices. They need to sell them at low prices. But this banker is arguing that they are too financially stressed to absorb the losses that would entail. Conversely, so long as they don't sell the assets, they can pretend they haven't lost any money on them, as they can pretend that they will rebound to a better price once the mania is over. The other way of putting this is that much of the banking sector is already insolvent, it's just not prepared to admit it.
