Understanding the Banking Crisis Via 'This American Life'

Adam Davidson and Alex Blumberg of NPR are magicians, for they have made it possible for the Lay People, like you and me, to understand this banking crisis.

Please take 39 minutes out of your day today or soon to listen to this story:

http://www.thisamericanlife.org/Radio_Episode.aspx?sched=1285

After listening, I was able to understand phrases like this

undercapitalized banks choose not to address problem loans because doing so would force asset write-downs

from the link I posted previously about the Swedish model of nationalizing banks.

Here's another quote I sort of understand

Credit restoration has proved to be among the most difficult resolution steps to execute effectively, and it can involve different public–private hybrid models to enhance the probability of success. An alternative to the Swedish method that is both bank and borrower-based was attempted by Mexico in the late 1990s, with a program called Punto Final. The program subsidized 60 percent of a loan if the borrower started repaying it, a cost that was shared equally by the government and the lender. The government’s share of the cost would also increase in proportion to the number of new loans the lender made. This had the effect of subsidizing only good loans (failed borrowers would rather default than keep throwing money at a loan they could not repay) and incentivized lenders to start credit flowing again.


That means instead of plain old nationalizing a bank, the country does a mix -- like joint ownership. The nationalizing and what goes on with it, I am still a little fuzzy on that detail.