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[Stock Lobster]

Re Citi: "So is Citi solvent? We just don’t know. But there are reasons to be concerned. We are in one of those recurring periods when the solvency of banks is doubted, like the late 1980s when the S&L crisis was brewing. Or perhaps it is more like 1974 when the failure of Herstatt Bank in West Germany set off banking crises throughout the world, culminating with the collapse of Franklin National Bank in New York City.

The problem is leverage. Too much debt has been extended on too little capital, so even a small decline in the value of a bank’s assets can significantly erode its capital and make it insolvent.

http://www.financialsense.com/editorials/turk/2008/0317.html