Morning Monkeys,
The concept of a "Zombie Bank" isn't exactly new, back in 1987 Boston College professor Edward Kane coined the term in response to the S&L crisis to describe banks that are technically insolvent but kept alive via government aid (and dicsussed it in detail in a journal article in Society). For the young, aspiring monkeys, identifying zombie banks is probably worth a little of your time. As every zombie story since the Epic of Gilgamesh has taught us, all zombies must die. A good lesson, but probably not exactly good news for zombie banks.
Does this suggest that every bank that has received government aid is a zombie bank? No, not necessarily, some may become healthy and cease being zombies. But, this is not the case for all of them. History gives us some guidance in how to identify zombie banks with two examples, the S&L crisis in the US, and the Japanese banking crisis during the 90s. In the former example, managers made risky bets, hoping for windfalls to plug the holes, or as Kane put it, "[they] gambled for resurrection." In the latter example, managers hoard cash and make few risky loans, hoping that time will heal all wounds. Anyone looking at Japan over the past 20 years probably doesn't have much faith in this approach.
So, what does everyone think? Who are some potential zombies on Wall St.? Think they'll heal with enough liquidity and time? If not, how/when should we kill them?
This article contradicts itself:
My understanding is that you cannot bring a zombie back. Although they can be tamed and kept as friends re: Shawn of the Dead
Touche sir. Poor wording choices on my part. Let's put it this way:
and
Sorry for the confusion.
I think the concept of "zombie banks" applies to pure commercial banking institutions (Lending, S&Ls, community banks, etc) ... not the typical Wall Street firm (i.e. diversified, global institutions with with IBD, S&T, AM, commercial/retail, cap mkts, research, etc)
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