This is a posting about the reality of our economic and banking situation. It comes from a reputable source you should mark as one of your favorites.

Recently people like Larry Kudlow, Sean Hannity, and Rush Limbaugh have caught my wrath. These demagogues are merely entertainers masquerading as journalists or unbiased analysts. Watch them for the entertainment, not news and information.

There is, however, someone I highly recommend. You won’t find him on TV. His name is John Mauldin and his blog is called Thoughts from the Frontline.

Mauldin’s latest column, called Time For A Reality Check, can be read here. 

Three things come out of the column that you need to know.

First, restoring the banks is more important than the stimulus package.

Second, the banking losses in Europe, according to a not-seen document, are close to a staggering $25 trillion.

Third, the losses for US banks are somewhere between $1.7 and $3 trillion — much more than we know.

And fourth, Treasury Secretary Geithner should not be criticized for his lack of specifics in the banking bailout package. In fact, Mauldin applauds Geithner’s generalities by using some stats from NYU Economist Nuriel Roubini.

What if the number that the Treasury and the Fed are looking at is a lot more than the remaining $350 billion in the TARP program? As in another $1 trillion more, or even the $1.5 trillion that Roubini says may be out there (and other independent analysts, like David Rosenberg of Merrill, say there may be another $2 trillion in losses). Can you imagine what the market reaction would have been if they had announced that this week? The Dow down 400 points would have seemed like a Sunday walk in the park. Congress would be screaming, and the chances for the stimulus package to pass would have materially diminished.

So, maybe the Administration is trying to protect us. I wish they wouldn’t.  Let’s bite the bullet: tell us what the bank bailout will cost and get the banks moving again.  Still, the shock to the financial system might be too much if investors really knew how bad things are.

Geithner’s continued efforts to protect us are evident during his meetings with the G-7 leaders.  He apparently showed his cards to other leaders who were originally skeptical like Wall Street than afterwards had a similar epiphany like Mauldin.

Granted, Mauldin confirms most of my beliefs on the banking industry. (However, I disagree with his belief that a Keynsian-like bailout isn’t needed; I do.) The biggest is that the banking losses – those toxic assets are larger than any of our leaders – political and business – are willing to admit.

I wrote about it last September in this post when I quoted the soon-to-be White House Budget Director Peter Orszag who said, according to the Washington Post on September 9, 2008:

Ironically, the intervention could even trigger additional failures of large institutions, because some institutions may be carrying troubled assets on their books at inflated values. Establishing clearer prices might reveal those institutions to be insolvent.

As Mauldin tells us, too, expect more bailout money – this time from the Fed – and more bank failures.

---