Its Dejo Vu all over again.
So all of the big banks are insolvent and are only being proped up by the FASB rule change and the Fed. Govt.
Ever wonder why your Citi (used to be City but Walter Wriston decided it would be sexier to change the y to an i) credit card statement comes from South Dakota instead of New York? In the early 80's, most (if not all) of the big money center banks were technically insolvent. They caused it that time by making billions of dollars in bad loans to Latin American (and some other) countries. It was so bad, that they had to make new loans to them so they could pay the interest on the old ones (so they could continue to pretend that they were performing). As a former banker (from this same time period), I can tell you that when you have to put out new money to keep the customer alive, it is a lost cause.
Luckily for Citi, they had a hard charging Retail banker named John Reed ( who replaced Wriston), who had come up with a way to bail them out. Of course this also took cooperation from the Fed's (to look the other way and let time heal the wounds), as well as ship loads of middle east oil money; but it was the retail and credit card business that eventually allowed them to earn enough to finally face reality on the huge commercial loans that had buried them.
Some where about this time the Supreme Court had ruled that as long as the rate you were charging was leagal in the state of origination (read South Dakota), it was not subject to the usury laws of the states your borrowers lived in.
Reed convinced the Governor or South Dakota (whose state was badly in need of jobs) to push through the state legislature a bill raising the state usury rate to 28.99% (sound familiar). They then moved their operation to SD and began the flood of credit cards.
Thus were the big banks (sepecially citi) able to lend their way out of bankruptcy.
Their was another crisis in the 90"s involving Real Estate, but they were able to overcome that one too.
My point is, that as long as the Govt. follows the rule of "Too Big To Fail" and is willing to be patient, and let the banks charge outrageous rates on credit cards they will in time, work their way back out of it.
This is not intended to be an exhaustive history of the American Banking industry, and was done from my own living memory, so if there are some minor errors, pleas ignore, or if you must, correct them.
This is also why I am long on C, BAC, HBAN, RD, LYG and AIB.
JMO and worth exactly what I am charging for it.