The 5th commenter - #515579, rostholder, and the responses to his comment - explains this more clearly than the author of the item.
In sum: BayWalk, and all the other little baywalks, may have a stay of execution; effectuated by kicking the can down the road.
The Fed and Treasury are broke. Really.
  • They cannot do a TARP 2-type bailout on the multi-trillions in CRE (commercial real estate) debt over the next 2-3 years.
  • They don't have the cash on hand and they dare not print the gobs needed to do the job.
  • Nor can they guarantee loans into the near future without placing the ability of the government to function in jeopardy when said loans prove bad, as they most surely will.
  • The phrase, "extend and pretend" is simply the latest alliterative mnemonic to summarize yet another in a series of moronic and self-defeating government policies designed to delay, as long as possible, the nation's fateful day of fiscal reckoning. By allowing banks (tacitly agreeing not to prosecute - "criticize" - them for bad banking practices) to extend the bogus (no hope of their ever being repaid) commercial loans in their inventory (that they couldn't unload on anyone else before the roof caved in), the banks can now avoid - for the moment - having to call in those bad loans (virtually all of them), hence taking the loss on their books, hence reducing their required reserves (cash-on-hand), hence leading to being taken over and closed down by the government. See how easy that was?
In 1930-1932, Herbert Hoover tried a similar policy of ignore-and-deny. It didn't work then and it won't now. Ole' Herb was the Prez who should have done the bank holiday thing, but he was a freebooter and let the market decide on his watch. We all know how well that worked out.
Some other inside -baseball terms used by the writer: QE = Quarterly Earnings; GSE
BTW, the "largesse" for residential RE referred to by the writer is to the banks, to back-up their toxic derivative mortgage loans, lest you think for a moment that the government temporarily lost its mind and actually helped the millions of poor slobs whose star-crossed fortune it was to have actually owned a home when all this went down.

Nigel Watson  freethinker  727.493.1990 freesense@Gmail.com

"It is no measure of health to be well adjusted to a profoundly sick society." – Krishnamurti
-A good pun is its own reword.

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