Where did the money go? It when through the highly-publicized front door, then quickly (and quietly) out the back to pay the OTC derivative winners. Flexibly accounting allows financial institutions to recapitalize their balance sheets over night. The flexibility created phantom profits and produced the illusion of “health” despite a collapse in credit demand across the board. The tinktank is right, another round of infusion is likely necessary because credit demand continues to contract sharply. Recapitalization via through Treasury purchases and OTC mark ups will drive earnings for only so long.
British banks may need another state bailout next year and their borrowing requirements could hit 25 billion pounds ($39.5 billion) a month, a thinktank said, although the UK finance minister dismissed any such scenario.
The independent New Economics Foundation (NEF) thinktank said it had examined Bank of England data and concluded that many UK banks appeared to face a funding cliff, as it published a report on Britain's banks entitled "Where Did Our Money Go?"
Source:
finance.yahoo.com
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