Big Banks 'Technically Insolvent'

The big US and UK banks are all "technically insolvent" experts warn.

Shares in the big banks have been under pressure all week as fears grow that the government could 'do a Railtrack' by simply confiscating the banks without paying compensation to shareholders.

At the moment Lloyds and RBS seem to be the "bookies favourite" candidates for nationalisation.

However experts warn that nationalisation of the two banks would increase national debt enormously, from 45% of GDP to about 300%. RBS alone has liabilities of nearly £2 trillion.

Meanwhile in the US much-touted economist Nouriel Roubini recently said that US banks are also "insolvent" and credit crisis write-downs there will total $3.6 trillion.

"If that’s true, it means the U.S. banking system is effectively insolvent because it starts with a capital of $1.4 trillion," added Roubini.

Bank of America's purchase of Merrill Lynch could be the ruin of it, analysts say. The bad assets of the brokerage firm were apparently both huge and well-hidden by management, the brokerage firm's board, or the auditors.

Citigroup's shares yesterday fell to a 17-year low just a few days after announcing a $8.29 billion loss, twice as much as analysts estimated.

There's going to be more tears before bedtime over this lot.