The problem isn’t just getting cash right now. These banks are still neck deep in writedowns because they were mark to fantasying their revenue. For years, the had been originating loan products like “Option ARMS” with no documentation or stated income required. Then they turned around and booked the potential interest earned on these loans as guaranteed revenue. Many of these loans were originated for housing gamblers who didn’t have any form of collateral/income for the property they were buying as quick flip investments. The majority of the MSM has been criminally negligent in the reporting of this. They only run stories about the few people who were steered into loans or refi’s and might lose their homes because that follows their “banks are all evil and prey on the poor” line of crap.
A major correction in housing prices wasn’t even required for this meltdown, just a return to normal appreciation or flatlining for a few months. Now that housing in many markets has simply peaked, the housing gamblers have stopped making any type of payments on these exotic mortgage products, such as option arms where they could choose if they wanted to just pay interest, interest and some towards principal, or even skip paying for periods of time and the size of the loan would simply increase.
This is beyond bailout time. Its time for the major financial institutions to mark their assets to market, but they will avoid this at all costs. Or at least drag it out over a longer period of time to make things appear not as bad as they are.
Everything you say is true. For the banks, however, the situation has now snowballed beyond the housing market into exposing a multi-tiered liquidity crisis that keeps blowing up in wave after wave.
What we’re now seeing in the major banks and the housing market is, as you say, beyond bailout time. It isn’t just the amount of money that would be required, it is that the market has to correct. A capitalist system has both booms and busts, and without the busts to correct the excesses and mis-allocations, the system (esp. the financial sector) gets further and further out of whack with the real market.
Greenspan and the Fed kept pumping liquidity into the system, something that came to be known as “the Greenspan put.” At some point, the system cannot withstand the pressure to correct the imbalances. We’re there or beyond now.