Tuesday, February 24, 2009
Despite operating in a regulatory grey zone, the nation's largest banks are not "zombies," Federal Reserve Chairman Ben Bernanke said Tuesday. The term "zombie" has become popular to describe a bank that exists but is only alive because of government support. The term was first used to describe Japanese banks during the "lost decade' in the 1990s. Just how damaged the banks are remains a mystery, even though the government has pumped billions of dollars into them in return for partial ownership stakes. The government is going to begin the process Wednesday to uncover exactly how big the "hole" is at the banks and has agreed to provide additional capital to fill the gap. Just how much capital is needed is also a mystery.