Reality No Longer Has a Seat at the Banking Table

There is little debate about the need to recapitalize European banks that have yet to fully disclose or mark their obviously troubled sovereign exposures. In fact, it is all but certain that those same banks are at least a hundred billion euros short in their capital accounts (and likely a multiple of that). Since the modern banking system is based on the idea of capital buffers rather than actual, physical cash (or gold), the accounting of capital stands as the basis for the entire system.