PIMCO’s El-Erian Drops The F-Bomb: “French Banks Are Down To 1% Capital, Institutional Panic Underway”

Saturday, October 1, 2011
By Paul Martin

TheDailyBail.com

El-Erian just screamed ‘shut their ass down’ from New York to Paris.

French banks have 1% capital. No polemic is needed. This is a solvency and liquidty crisis.

Notice below the bold quote from the CEO of the world’s largest bond fund. Not to overstate the obvious, but 1% capital ratios imply leverage of 100:1.

Calling Helicopter Ben…Sarkozy would like you at the launch pad, immediately.

How soon does Bernanke’s central bank rain dance begin?

FT via Marketwatch

Meanwhile, high-profile warnings over the state of Europe’s banks, particularly in France, came from a variety of sources.

Mohammed El-Erian, chief executive of bond fund giant Pimco, warned in an op-ed in the Financial Times published Thursday that French banks could tip Europe back into recession.

Private institutions around the world have sharply reduced short-term lending to French banks, while a plunge in bank shares since August has left bank equity trading at a 50% discount to tangible book value on average, he wrote.

At the same time, El-Erian noted that the ratio of market capital to total assets for the sector has fallen to 1% to 1.5% — far short of the range of 6% to 8% typically seen for healthier banks.

The Rest…HERE

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