[click here for the original spreadsheet with links to the filings]
Back to the big 4 and the so called bad bank.
1. The big four are indeed big. They have $7.5 trillion in assets and $3.3 trillion in loans. Against these loans, they have $87 billion in provisions for bad loans.
2. Loans are never marked to market. Never. Never have, never will.
3. The $7.5 trillion is over a third or more of our total bank assets, on a dollar basis.
4. They have $341 billion in capital.
5. With the current net interest rate spreads, they are making $50 billion/quarter excluding losses.
There is a good case for putting the various structured mortgage backed securities into a bad bank or some sort of holding entity to simply amortize. They can't be sold AND not result in the paradox of deleveraging. That is, the more these assets are liquidated, the worse the ratios of any entity selling.
These isn't much of a case for doing anything with loans.
The 4 banks in question are already bailed out. They have been deemed too big to fail, so thats it. They also have FDIC insurance to allow them to gather as many brokered deposits as they need.