The Fed cut rates for the seventh time in eight months yesterday, pretty much sticking to the script. There was talk of a pause, just as expected -- and yet traders didn't like it. The morning rally evaporated by the time markets closed.

So what's not to like? Isn't the worst supposed to be over for the financials? Isn't the light at the end of the tunnel supposed to be shining more brightly now?

Ah, perhaps that's the rub. Citigroup, good old Citigroup, couldn't have helped things much by going back to the well for $4.5 billion.

Kicking the Radio

Meredith Whitney is a red-hot Wall Street analyst whose claim to fame is being hard on the banks. Citi is now down more than 50% from a year ago, and Ms. Whitney saw all this coming. Now she wonders why Citi is piddling around with such small amounts.

"The fact that the company raised such a small amount of capital at this time confounds us," Whitney said in a note to clients. "Citi needs to raise an additional $10-$15 billion or sell several hundreds of billions worth of assets in order to truly shore up its capital position."

That doesn't sound like the worst is over to me. How about you?

Adding to the fun, the European Union is now getting into the bailout game. EU regulators have approved a $7.8 billion rescue plan for WestLB, a faltering German bank.

According to AP, "The Duesseldorf-based bank lost 1.6 billion euros ($2.5 billion) last year on risky investments in securitized U.S. mortgages that were approved for people with poor, or no credit history."

True story: When I was a kid growing up in San Jose, California, a friend of my dad's had a bulky old portable radio. Somehow -- don't ask me how -- this old radio got filled up with cockroaches. (Maybe it was left in the corner of a basement.)

I remember my dad telling me how they took that radio out onto the driveway and kicked it, and bugs started pouring out. Then they would kick it again, and even more would pour out. Then they would kick it againà it was if there were an infinite number of roaches in there.

Western banks are starting to remind me of that radio.

Guess WhoÆs Coming to Dinner

There is a spot of brighter news from the banking world, though (or at least more interesting news, depending on your point of view). It turns out that three of the world's top four banks are now Chinese.

Just sit back and think about that for a moment. Three of the top four banks are now Chinese.
The rankings were compiled by the Boston Consulting Group. Spots were determined by market cap (how much the respective banks were worth in stock market value). First place went to the Industrial and Commercial Bank of China, with a market cap of $340 billion. Second went to China Construction Bank. Bank of China came in fourth, behind HSBC of Britain. (And guess what the letters HSBC originally stood for: Hongkong and Shanghai Banking Corporation.)

According to the Boston Consulting Group Study, Western banks (i.e., banks in North America and Europe) had coughed up a stunning $695 billion in market value (shareholder value) by the end of 2007.

At the same time, banking institutions in the various BRIC countries -- Brazil, Russia, India China -- saw their market cap increase by $753 billion.

Let's see, six plus seven, carry the four... that's a swing of nearly $1.5 trillion away from rich world banksà and towards emerging market ones.

As Jack Sparrow remarked to Captain Barbosa, "Funny old world, innit?"

A Rose Is a Rose

"A rose by any other name would smell as sweet," Willy Shakespeare tells us. If you turn that around a little bit, you get something like "Skunkweed by any other name smells just as bad." And skunkweed is what we've got as far as Western economic conditions go.

There was some hoopla over the fact that, according to official statistics, the U.S. economy didn't actually shrink in the first quarter. Because the stats showed minuscule growth of 0.6%, we're still just barely outside the according-to-Hoyle definition of "recession," which requires two back-to-back quarters of GDP decline.

Mmm, okay. But does it really matter? Sometimes labels and definitions are useful, but sometimes they just get in the way. Do we really need some Beltway bean counter to ring a bell in order to see that conditions are tough -- and getting tougher -- right now? Not just in the U.S. but Europe, too?

It would seem so, but then again maybe not. Maybe the Wednesday morning rally evaporated because investors are smarter than that -- some of them, at any rate -- and are willing to acknowledge the handwriting on the wall.

Acknowledging the Obvious

When an outfit like Citi is still coughing up blood after all this time, and dinky little regional banks all over the country (and the world) are still revealing the extent to which they got mixed up in bad loans, and then you hear stories of cash-strapped U.S. consumers selling grandma's teakettle to help pay the water bill (true story), well... after all that, it's kind of hard to swallow that the Fed is done or anywhere near it.

If the Fed isn't done (and they aren't), that means more dollars will be coming. Lots more dollars. A new flood is nigh. The printing press may be taking a break, but "full speed ahead" will resume -- it's just a matter of time. (There is a reason, too, why the Treasury is talking openly of "new powers" for the Fedà exploring new back-door ways to pump cash into the system when the rate-cut bullets run out.)

And then, after pondering the state of the West, you swing back around to that $1.5 trillion shift mentioned above (or at least I do), and maybe you think $1.5 trillion, that's not a small number. Savings rates in so many emerging market countries are up in the 20%, 30% even 40% range even as the Western consumer is going broke, and all those new-world savers and workers have a hunger and a taste for everything the Western World enjoys...

It paints a vivid picture, no?

I'm still in mild awe of that China bank news. We'll talk more about China tomorrow.