Why did Wall Street take fright yesterday? Electronic Data Systems Corp founder Ross Perot put it succinctly a year or two back when he pointed out that the Japanese would keep lending America money to finance its twin deficits, and that, like a son whose father suddenly stops giving him handouts, when the Japanese stops lending, the boom really falls: Japanese banks are permitted to add 45% of the capital gains showing on their share portfolios to their capital bases for the purposes of meeting regulatory minima, and those capital gains are beginning to turn to capital losses, at which point the capital adequacy levels start getting breached, the banks have to stop lending, and some may have to sell assets to rebuild their bases – there are some hard times ahead.
