Europe is bad and getting worse.
The Wall Street Journal delivers the bad news from Europe's banking sector:
The European sovereign-debt crisis placed new strains on the Continent's banks on Wednesday amid signs that some lenders are finding it harder and more expensive to fund themselves.The cash crunch for some European Union banks underscores the challenges that central bankers and regulators face in preventing the bloc's economic and debt problems from seeping into the bank-funding markets.
The barometers that central banks and analysts use to monitor stress aren't showing extremely heightened levels. But certain gauges are flashing warning signals: Bank funding from the European Central Bank increased and European banks and corporations have had to turn to the currency markets for dollar funding, instead of borrowing from one another or selling debt.
In countries like Spain and Italy, banks face the added difficulty of having to deal with a recent sharp drop in the values of government bonds that form the mainstays of their balance sheets.
As Kevin Drum points out, the inability of banks to get anything other than very short term funding is what happened to Lehman Brothers shortly before it imploded. And we all know what that led to.
