While Washington continues to debate the best ways to fix Wall Street, Wall Street is already healing itself. This from Jim Glassman at JPMorgan Chase:
Financial markets are reopening for new business.... A key factor in this improving sentiment...is the recognition by banks of losses. Announcements of bank writedowns are heading to page two. Since last summer, the international banking community now has marked asset values down almost $350 billion. And it has raised more than $260 billion of new capital. Even if the most pessimistic assertions were right, that aggregate credit losses suffered by all investors could be up to $1 trillion and those at leveraged companies about $400 billion, this is real progress.... This cautious optimism is supported by at least two other considerations. First, many market critics believe that banks have been forced to overdo the writedowns, because of the mark-to-market rules that look to market indexes for guidance on how to value assets.... If they are right, some writedowns already recognized will turn into markups in the future. Second, further declines in house prices are not likely to lead to as many new foreclosures at the same intensity that was observed in the last couple of years, because the 12% decline in house prices to date seems already to have washed out many of the speculators.