The problem is with trust. Trust has evaporated, greed gone wild.-RObin Trehan

Jan. 23, 2009 - PRLog -- The problem is with trust. Trust has evaporated, greed gone wild.

Yes, assets and liability are as bad or even worse than what we think. Think it over for example; the real estate (commercial or residential) which was for example $1,000,000 is not for sure $650,000 to $700,000. Banks has or will have to take a haircut of $300,000 per loan and the present equity of T-1 capital is not sufficient in any manner whatsoever.

It was not that regulators who were at fault. Actually, they were not. The reason, is when asset value is increasing most owners do not complain and pay their mortgage or they refinance. I call refinance “Mini Sale”. Property value were going up every quarter, and banks or their partner mortgage brokers were underwriting loans as much as possible  and very often based on inaccurate valuations.. More the loans more the money! But the problem was not the loans but who was holding it last. The game of “Hot Potato”, the person holding the last will drop it, as the potato keeps getting hotter.

This problem will be further augmented by credit card crisis which will happen with unemployment rate going up. So, will be the commercial real estate crisis which is just opening up the doors.

Also, one important thing to remember is the “greed” of top wall street. There is no way, taxpayer money should be on line, if there is no upside to it. It is beyond common sense. Top management salaries are way out of order.

I think initialization is a good way out for 4-5 years and with time government can sell it back to private sector when economy picks up.

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