NYT Chickens Out on Insolvent Banks

The Times runs a front-page piece this morning looking at the argument that much of the nation’s banking system, especially the biggest banks, is effectively insolvent.

But there’s a hole in the story as big as Citigroup’s balance sheet: The piece doesn’t mention a single institution that might fit the bill.

Why not? Was the Times afraid of getting sued or of triggering a bank run? Here’s its explanation, in the third paragraph:

None of the experts’ research focuses on individual banks, and there are certainly exceptions among the 50 largest banks in the country.

Its columnist Paul Krugman wrote a thinly veiled column about Citigroup’s effective insolvency just a few weeks ago, calling it “Gothamgroup.”

Why dance around the issue? The Times should give us an example of what these experts are talking about.

UPDATE: This NYT post on its DealBook site doesn’t hesitate to name names.

Creditsights’ projections were driven by its own forecast for future credit losses based on how badly the market could perform over the next two years. Under these assumptions, the losses from mortgage-related products would be significantly higher than the amount the banks have set aside already. It also envisions an unemployment rate of 10 percent.

The future losses for some banks are staggering by Creditsights’ estimates: Wells Fargo, $119 billion; BofA, $99 billion; JPMorgan, $124 billion; Citi, $101 billion; Goldman Sachs: $47 billion; Morgan Stanley, $34 billion.

If the government uses a similar scenario, it would probably need to inject all of the firms with billions of dollars in new capital to stabilize them against future losses.

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Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR's business section. If you see notable business journalism, give him a heads-up at rc2538@columbia.edu. Follow him on Twitter at @ryanchittum.