The largest banks in the country were profitable last year. Capital impaired? It’s hard to be capital impaired when you’re hitting record earnings. How does this square with all the bad news? The losses were largely in the fourth quarter and were smaller than the profits recorded earlier in the year. John Berry explains this quite well on Bloomberg (hat tip to Economist’s View). Berry was writing before Bank of America (BAC) announced its earnings, which were plus $15 billion. OK, maybe I have a small town mentality, but it’s hard for me to fathom how a company with $15 billion of profit could be hurting.
Economic impact: the banks have missed their targets, they are set back from where they were in the summer, but they are not so weak as to be unable to meet the credit demands of credit-worthy borrowers, whether companies or consumers.