That's a potential panic trigger too.  Anyone remember 1989?

Have a look at the regional banks.  NCC, BKUNA, WM, FED, DSL, WB, RF, etc.  Pick one.  How many of those stock charts look like an imminent FDIC takeover?  Can the market be wrong?  Sure.  It is all the time.  Is it wrong about all of them at once?  I can't tell you which one(s), if any, are safe and which are not.  Why?  Because I can't dig through their balance sheets sufficiently well with the information we're given as "peons" to know what sort of tomfoolery has been engaged in!

I started writing about this more than a year ago with WaMu, when they reported more "capitalized interest" than actual cash earnings - and in fact their cash earnings were insufficient to support their dividend. 

What's "capitalized interest"?  Its the negative-amortization from "Option ARM" mortgages, basically.  Banks get to report that money as earnings even though they didn't actually receive any cash.  This is all fine and well so long as you will eventually collect that money.  But what happens when the value of the house drops below the outstanding mortgage balance?  Is that "capitalized interest" still "money good"?

Now try to figure out which of the banks has a problem with this.  Good luck.  The market has decided that the answer is "all of them" because they can't separate out the good from the bad.  Have a gander at the volume of PUTs - bets on decreasing stock prices (perhaps to zero!) that are being bought the last few days - those purchases have been ramping at an alarming rate.  Not good.

Next up are the bond insurers:

"June 18 (Bloomberg) -- Bill Ackman was right: the world's largest bond insurers aren't worthy of a AAA credit rating and may be headed for the bottom of the scale.

Ackman, the 42-year-old hedge fund manager who says he stands to make hundreds of millions of dollars betting against MBIA Inc. and Ambac Financial Group Inc. if they go bankrupt, will tell investors at a conference in New York today that losses posted by bond insurers may threaten to breach the capital limits allowed by regulators, making them insolvent."

Sometimes the shorts are right, eh?

Shall we hop across the pond?

"``The Monetary Policy Committee is prepared to take whatever action is needed to return inflation to the 2 percent target and to keep expectations of inflation in the medium term anchored to the target,'' King said in London.