Posted by: Dirk | September 10, 2009

Nightmare on Wall Street

A zombie bank, according to Wikipedia, refers to a financial institution with an economic net worth that is less than zero, but which continues to operate because its ability to repay its debts is shored up by implicit or explicit government credit support.

However, we have seen recently that zombie banks come in diverse flavors. I therefore propose to extend the list of bank species and therefore acknowledge the evolution that the sector has experienced. Here are proposals for two new subspecies:

Vampire banks: These financial institutions live off fees they collect from their customers. Survival of these banks is assured by sucking money out of the victims. However, having their practices exposed to daylight is extremely hurtful for vampire banks.

Ghoul banks: These banks survive by digesting other zombie banks in order to survive. Think of Bank of America taking over Merrill Lynch. Scientists are still struggling to understand exactly how the digestion process works.

As you can see, I am reading about the lessons from Japan’s great recession.

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