Japan Banks Tiptoe Amid Crisis

Japan began patching up the cracks in its banking system Wednesday, reports CBS News Correspondent Barry Petersen. The relatively healthy Industrial Bank of Japan became the first to ask for some of the half trillion dollars in government money set aide to help faltering banks.

Still, analysts see trouble ahead because some weak banks may reject the bailout cash, afraid that accepting public money will bring public disclosure about decades of questionable deals gone bad.

"These bankers are desperately afraid of having to come clean, and tell the nation how they drove their banks into the ground," says John Neuffer of the Mitsui Marine Research Institute.

For example, according to the Japanese media, a number of troubled banks loaned about $2.9 billion against a downtown high-rise building.

At today's value of $112 million, lenders would recover a measly 4 cents on the dollar.

Stocks bought and sold at the Tokyo Exchange have lost two-thirds of their value since the go-go 1980's. However, Japan allows its banks to ignore today's depressed market value and list stocks on their books at that original high price. So while banks claim they have big reserves, what they really may have are phantom assets.

Such funny-money accounting keeps banks open that would be insolvent in America -- Japan cannot survive if the banks aren't healthy.

"So now we have to fix this problem or the economy is just going to die," says Tara Kono, a member of Japan's parliament. "I guess it's going to be panic."

But Japanese officials are still not ready to change their old-boy ways and force reform on a shaky banking system that is choking any hopes of Japan's economic turnaround.

Reported By Barry Petersen