By William K. Black
June 28, 2016 Kansas City, MO
Andrew Ross Sorkin is back, so unintentional self-parody is again the order of the day. Wall Street’s sycophant-in-chief, introduces his column with a 98 m.p.h. fastball aimed at the reader’s chin.
This isn’t meant to scare you, but let’s consider the absolute worst-case scenarios of “Brexit.”
Sorkin’s column then presents his specific example of his absolute worst-case scenario. See if you can spot what is missing from that scenario.
Consider this: Italy’s government is considering pumping as much as $45 billion into its banking system after the Brexit vote. Shares of the biggest Italian banks have fallen more than 20 percent since the results of the vote were announced. And Italian banks are considered particularly vulnerable because they hold hundreds of billions of euros in bad loans. If Brexit forces a material economic slowdown across the Continent, Italy’s banks — without a rescue plan — could significantly suffer.
OK, Italy’s elite bankers made “hundreds of billions of euros in bad loans” that are still on their books nine years after the onset of the Great Recession. That should have prompted deep analysis by Sorkin about why the bankers made the loans, what role they caused in producing Italy’s crises, and why the regulators have allowed the bankers to “extend and pretend” the bad loans as if they were good loans for nine years.