Regulators Close Seven More Banks - BailoutSleuth: "The New York State Banking Department shut down Waterford Village Bank, a one-branch bank with $61.4 million in assets and $58 million in deposits. Evans Bank, based in Angola, N.Y., agreed to assume all of the deposits and nearly all of the assets.
It entered into a loss-sharing deal with the FDIC on $56 million of the assets."
I always thought assets were good things. But apparently at a bank, assets can consist of phantom things; hence the FDIC has entered into a loss-sharing deal on the assets of Waterford Village Bank, because the acquiring bank, Evans Bank, expects losses on these "assets".
This is why many people think that nearly all banks are insolvent. They have "assets" but they aren't worth the value written in the books. The most obvious example has been mortgages where the value of the "asset" - the house - is less than the loan.
At the very least, we should use a different word than "assets" to describe the collateral for loans. "Collateral" sounds like a good word. Banks should have a line item for "collateral" that is separate from whatever "assets" they hold.
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