Back to equilibrium?
A very reassuring sign from Barclays and the FSA (via Robert Peston) today - the FSA's evaluation that Barclays will not need to raise new capital or buy the Treasury's asset insurance (though it can voluntarily do so if it wishes). Of course this is good news for Barclays itself and a good sign for the financial system. But it also heralds a more subtle improvement in the economic firmament: the possibility of a return to an equilibrium market in finance. Over the last 18 months, contagion has ruled the markets. Any financial institution in danger created a concern for the viability of all others. When Lehman failed, lots of other banks (and insurers such as AIG) all suffered because they were trading with it. When there was even a sniff that Citigroup, or HBOS, or other banks might go under, everyone else suffered too. This is not how normal markets work. If Alitalia were to collapse, Air France, British Airways and Ryanair would all benefit. If one of your local pubs closes...