Just while everyone's getting bullish on banks, it makes me start to wonder how exactly are the banks going to be earning record earnings.
Commercial companies that are defaulting won't get loans, banks will only lend to the most creditworthy company.
Consumers are too strapped to borrow more from the previous ten year cycle of borrowing. Moreover, credit availability will decline in an effort to ensure repayment of existing credit, and shortfalls in credit securitization.
Earnings grow with rising employment, rising incomes, rising creditworthiness. What we will see in 2009 is employment losses, more hours per dollar spent, and increased delinquincies.
Comptroller Dugan recently advised over half of loan modified in the first quarter of 2008 defaulted AGAIN. Why? Because the fundamentals for the housing sustainability just isn't there. Stabilize the employment outlook, increase (or atleast reassure the consumer won't lose) employment income, and people will buy houses again.
$102.55 (12/09/08)
