December 30, 2009: The next six months will reveal how severe the next wave of credit risk really is. We know that a second round of delinquencies and foreclosures related to Alt-A and Option-Arm loans are about to begin, along with the requirement in January that banks and other financials will have to bring “off balance sheet” entities onto their books. As a recent footnote by Freddie Mac has addressed, this could have a negative impact on the company’s net worth.
One of our main concerns in the recovery of this economy is that we are going to hear new phrases like “too small to bail” or “too weak to wait.” While the “too big to fail” banks are prepaying their TARP money so they can have the government out of their business and they can pay out their executive pay bonuses, the regional banks could suffer even more and become the next victims of this economy.
While the Federal government is budgeting a decade of endless debt increases to build the kind of green economy they want, the regional bankers and small business people will see higher taxes, reduced economic growth, and higher inflation.
Greg Powell, CIMA
President/CEO
Wealth Consultant
