It's always the same with these European banks.
First, they say they have little exposure to bad assets. Then, it turns out they have a huge amount of them. Then, they tell us that they have raised enough capital and it isn't a problem. Then, it turns out they haven't raised any capital at all or very little vs. the exposure. Then, they tell us not to worry because everything is priced very conservatively. Then, it turns out the stuff is valued near par.
First, it was the case with the sovereign bonds. Now the Journal has a terrific piece about how they have half a trillion in subprime exotics which we know have usually turned out to have little to no worth.
The only solution, as is always the case, is time. Time to be able to sell the stuff and then raise the capital to offset the losses.
The problem is the lack of time left as just as the European banks have begun to the do the first option for sovereign debt they haven't even started the second option.
My take is that we are now in the all-Italy-all-of-the-time moment and this one will play out worse than Greece and take longer and will constantly pull us back down, like today, as we try to advance.
The toxic debt we know they have will only make things worse.
There's been no capital raises. There's been little honesty about the marks for sovereign debt. I can't even begin to imagine if there is any honesty about the CDOs they have.
So the pain continues.