Once the major American banks survive this period of stagnation intact, they can and will rule the world once again.
The conventional wisdom these days is that American banks, on government life support, are destined to lose their dominant place in the global financial universe. Nothing could be further from the truth. In fact, many of these institutions are currently gaming the U.S. administration’s new “public-private partnership” program to buy and sell toxic assets to their own advantage. Citigroup, for example, has been one of the most active buyers of toxic assets such as Residential Mortgage-Backed Securities (RMBS). These products are probably marked at inflated levels of 80 cents on the dollar on Citigroup’s balance sheets, yet Citigroup can buy them at, say, 20 cents on the dollar in the secondary market. Thus, when it has to eventually sell them back to the government at, say, 60 cents on the dollar, it stands a chance to turn a nice profit at the expense of taxpayers.