I would agree with you that leverage is too high for banks that have a lot more volatility in assets (Citi, BofA, etc.) but the regionals that didn’t go crazy with subprime/construction loans should be allowed more leverage than the investment banks masquerading as depository institutions. The amount of leverage should have an inverse relationship with the risk on the asset side. Companies that load up on crappy assets should have low leverage.

It is suprising to me that anyone would assess companies that largely do unsecured lending (AmEx & Capital One) as needing no more capital.

1. If a bank has $4 do they just write someone a check for $100 to buy some asset (stock, bond, SIV, etc.); or do they actually borrow $96 from a greater fool? If they do just write a check for $100, this would seem to be stretching the meaning of credit (previously shown to be derived from the Latin for “trust me”).

2. If the value of their asset initially worth $100 declines to $96 is the bank wiped out?

Growth is overrated.

When you work hard and get a bonus you can decide to divy up the money between the exisitng members of your clan or decide to add a little one. In the first case everyione is a little richer, in the second case, everyone is a little poorer.

That’s exactly what we’ve been doing in the western world. Everyone is obsessed with GDP growth and population growth, never questionaing it it madkes sense.

You can have a flat GDP amid a declining population, yet everybody gets richer.

Every time I’ve been out West, I’ve witnessed the Japanses’s incredible buying power on the ski hills. Let me tell you, it does not look as if they’ve suffered much in the last decade. Maybe the next one will be different but that’s another issue.