They could not obtain bank financing.

Financing from banks has also been constrained owing to deleveraging, particularly by European banks.

One consequence of the ECB s large scale long term refinancing operation (LTRO) has been that Italian banks are once again buying Italian government bonds, and Spanish banks are buying Spanish bonds.

But larger banks can get into trouble when these two principles get mixed up. The idea of the larger bank reached its high point in continental Europe, and especially in Germany, whose big banking system developed out of trade finance and into industrial finance in the late nineteenth century.

The inter bank market dries up, as banks lose trust in one another.

Banks in the eurozone came under pressure, and interbank tensions increased.

Today, however, Spanish banks especially those most heavily engaged in domestic mortgage lending must pay a much higher spread over interbank rates to secure new funding.

Both the equity and the debt issued by well capitalized banks would be safer and therefore cheaper.

What made finance so lethal in the past was the combination of economists ideas with the political power of banks.

Europe must break the vicious circle linking distressed sovereign borrowers with banks that are obliged, or at least encouraged, to buy their bonds, which in turn provide the funding for bank rescues.

Large enterprises can secure financing from banks and other institutional lenders.

Greek banks would need to be recapitalized, but then they could make new loans again.

None of this means that banks should be granted a regulatory holiday and forget the need to recapitalize.

The idea of the larger bank reached its high point in continental Europe, and especially in Germany, whose big banking system developed out of trade finance and into industrial finance in the late nineteenth century.

The relationship between funding mechanisms and governance is also touched upon.

A cross sectoral approach to financing should be adopted.

But how can we distinguish good banks from bad?

Improved central bank policy is another huge factor.

But, although banking and finance have taken center stage, the EU s constitutional problem refuses to go away.

Other creditors, too, will continue to provide financing, because they expect that the (national) authorities will intervene either by providing emergency funding or by arranging a merger with another institution before the bank fails.

Financial speculation has been, and remains, one required source of funding.

The Bundesbank has stated that it will no longer accept bank securities as collateral from banks that have undergone a government recapitalization.

Second, the measures must be accompanied by forceful messages to commercial banks to address their medium term recapitalization and balance sheet repair issues.

The chief point of intersection between the European and US approaches is major banks.

Indeed, the Asian Development Bank estimates that European banks fund about 9 of total domestic credit in developing Asia three times the share of financing provided by banks based in the United States.

For example, the Institute for International Finance, a preeminent Washington, DC based lobbying group for large banks, consistently argues bail us out, or else face the consequences.

In the second stage, starting in the spring of 2009, the crisis spread to the sovereigns, as investors grew increasingly worried that propping up banks would strain government finances. In turn, sovereign weakness made the banks appear riskier, and the banks and their home governments became joined at the hip.

The distinction between the two prices is the foundation of modern finance theory.

If anything, domestic banks with shallower pockets were more likely to cut back in the crisis.

So long as European banks remain undercapitalized and overleveraged, a sustainable recovery supported by robust bank lending is unlikely.

By contrast, modern banks would seek finance mainly in the interbank market and securitize their loan portfolios.

Lulled into complacency and excess by ample supplies of artificially cheap financing, Irish banks went on a lending binge.

Banks

The banks.

Banking!

As a result, the administration has confused bailing out the bankers and their shareholders with bailing out the banks.

Another breakdown of the interbank market is therefore very unlikely.

2. Statement of resources and expenditures for the period ended

Such a tax, moreover, would aim to eliminate the funding advantage that large banks enjoy over their smaller competitors, while limiting the incentive for big banks to become even bigger.

That may be part of the story, but competition for talent and for customers seems intense between investment banks and others, yet they have collectively been extravagantly rewarded at the expense of those customers.

In the eyes of most observers, to reach the leaders goal of break ing the vicious circle between banks and sovereigns required centralizing authority for bank resolution and rescue.

To provide short term financing to a bank during any restructuring, the Commission s plan would create a European Fund, putting all banks on an equal footing.

Financing should be secured before beginning implementation and donor coordination should be strengthened.

Specific pledges and commitments would continue to be made in the discussions between funding organizations and individual recipients.

Because government provides deposit insurance, it plays a large role in restructuring (unlike other sectors). Normally, when a bank fails, the government engineers a financial restructuring if it has to put in money, it, of course, gains a stake in the future.