This week’s Washington Post column is (finally) out, and its a look at the Buffett’s bailout of Bank of America, and what it means for the overall financial systems.
“Many investors assumed the Wall Street bailouts of Bank of America and the other big banks more or less healed the sector. All it took was few trillion dollars in liquidity and a few $100 billion in recapitalization. Voila!
In fact, the banking system was not saved. The massive injections of liquidity temporarily salved the day-to-day operations of banks, but they did not repair the more profound troubles. Indeed, pouring billions into nearly identical management teams that mismanaged risk, overleveraged exposure and drove banks off the cliff in the first place was an invitation for another crisis.
In past weeks, Bank of America has been under increasing pressure from investors. Its already damaged stock was cut in half, and commentators including myself argued that the bank was headed back toward the rocky shoals of insolvency.”
The rest is my regular “Go Swedish” rant . . .
A how-to guide for fixing America’s banks
By Barry Ritholtz
Washington Post, August 27 2011