News that "Major Banks Likely to Get Reprieve on New Capital Rules" could not have come at a worse time for these banks. Call me old fashioned, but when assets on banks' books are tanking it seems ill-advised for "regulators" to err to the side of forbearance, particularly in light of still-fragile confidence.
No doubt precious, though, is every penny made available to banks for playing the slots in hope of a big payday that might plug giant balance sheet holes regulators continue covering up, as assets marked to fantasy remain no less doomed by what the market, in fact, will bear. After all, the situation is desperate, and JPM's Jamie Dimon confirmed this in a public challenge of the Fed chairman this past Tuesday.
Following the FinReg 2010 exercise in make-believe pretending Adam Smith's Leveraged Ponzi Scheme still has legs, it stands to reason every accommodation would be given to bolster the illusion of the trans-Atlantic banking system's solvency. Furthering the cause is former U.S. Senator and New Jersey Governor Jon Corzine, who, although disagreeing with Dimon's concern, shows himself only the more persuaded in the viability of derivatives-based, leveraged finance.
For its part Morgan appears game doing what it can to secure greater physical backing of its balance sheet. Although hedge fund business loans would not be at all lucrative in a Glass-Steagall environment, their value now certainly appears in their prospectively offering attractive asset stripping opportunities. Whether gains made this way can be further levered to any significant degree is another question entirely.
For the moment it appears there's nothing to worry about, despite the most prolonged market decline in some years. Obviously, selling has remained relatively restrained, and the market's underlying technical state, although weakened, now appears well-poised for recovery yet again amidst persisting technical deterioration over the past year and a half, if not longer.
So, the stage could be set for squeezing bank shorts and in so doing, making way for wave 5 of (c).
Then come the inevitable Greek credit event?
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