Geithner and the Zombie Banks
posted: February 16, 2009
There is a growing suspicion among banking and finance experts that the Obama Administration's approach to the banking crisis is being blinded by the interests of the key players, like Secretary of the Treasury Tim Geithner. Like his immediate predecessor Hank Paulson, on whose team Geithner was a junior member, they are card-carrying members of the banking establishment from whence they came and to whence they will go when their public service careers are over.

The experts, like those discussed in this piece by Arianna Huffington, say that many of our country's largest financial institutions are zombie banks*, the walking dead, fundamentally insolvent but kept alive by regulatory camaraderie. For those of you in a reading mood, there's another good piece on the banking crisis by Robert Kuttner here on the HuffingtonPost.

For years, these giant banks and brokerage houses have accumulated bad investments, but the guys who run them are not falling on their swords or jumping out of the their windows. They are hanging on for their dear lifestyles in the hope of being propped up by Geithner, which he shows every indication of being willing to do.
The Zombie Banker with his propper-upper....
*Zombie Bank: Economist Edward Kane's term for an economically insolvent bank that doesn't sink into formal bankruptcy because its regulators and central bank connive to keep it afloat. (Martin Mayer, "Why Secrecy Is Bad for Banking," Wall Street Journal, 12/30/97).