Take the worst fair-weather fan, multiply it by 10, and what do you get?  Your typical banker. When times are good, they’re your best friends.  But when they hit a little turbulence, they forget who they are.  They’re banks.  Banks lend.  It’s what they do.  Fans root for their local teams.  Banks loan money to their customers.  End of story.

At these lower Fed interest rates, banks could make good money from lending at higher rates to deserving customers (and there are plenty of them).  So what are they waiting for?

Oh, they don’t lack excuses.  But mostly they’re scared of the unknown.  They’ve been generating money from securitizing debt for so long, they’re not sure how to proceed.  Will that market rebound?  Will others take its place?  Their confidence is shot.  The financial world was their plaything.  Now, they’re the ones being played. 

The hotshot analysts have a word for it.  They’d say their “earnings visibility” is poor.  That’s Wall Street speak for they don’t know where the heck their future revenue is coming from.

Some optimists believe the banks are experiencing “blackouts,” like what happens sometimes to the electricity grid or Internet.  Everything stops.  And that certainly describes the state of the financial sector.

According to network theory, these blackouts can go just as quickly as they come.  I’d like to believe that.  Who wouldn’t?  These banks are in extreme straights, aren’t they?  And the very nature of extreme conditions is that they don’t last.  So, network theory makes sense to me.  

But when this “extreme condition” is replaced by something else – less extreme but for a longer period – it will feature banks regaining their footing amid suspect debt securities.  What will that look like?  And how much will it free up lending?

The government bailout of Bear Stearns puts the increasing vulnerability of banks front and center.  They have a long way to go before they get a clean bill of health.  Heck, they have a long way to go before they hit bottom and start turning things around.

We can’t wait that long.  Even in their weakened state, we need banks to do what they do – lend. Somebody – Ben, are you listening? – needs to administer a shot of adrenalin to these moribund financial institutions.  And the sooner the better.