Banking sector ..... little improvement?

Implode-Explode Heavy Industries, Inc., OptionARMageddon (Rolfe Winkler) and The Bailout Blog have a good selection of material relating to failings in the financial sector. The carnage continues with little relief despite the massive central bank interventions. There is some evidence of the financial system stabilizing, but the continued decline in economic outlook and all its linkages leaves a great gap in certainty. The UK has announced a new bank bailout program. And with the realities of Citi and BofA looming large, I looked back to this piece from October 2008. It has a lot of information but I was struck by the enormity of the leverage by the banks. Early in the crisis the Americans were fingered as a core instigator. It was this piece that reminded me that other foreign banks were equally leveraged and at risk as well (click figure for larger [and readable]version). And we have certainly seen this unfold in a myriad of ways, mostly unanticipated. With rapid deleveraging taking place, what do those leverage ratios look like now? and what must they become for stability and confidence to be restored? I see this as an integral part of the imbalances discussed earlier (Talking has overtaken doing). But I stepping way outside my understanding of these issues. At the same time I am fascinated.

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