This morning I heard some joker on an Intelligence Squared podcast call the heightened risk based capital requirements set by the Basel Committee and Dodd Frank as “dead capital”. It’s part of this “The Banks Are Fine” meme that has spread through the business media. It has to stop. The banks are screwed.

Admittedly, not yet. But how do they make money? What assets do they hold? Mortgages? Dead. Derivatives? Good luck. Bonds? Good thing they slashed their inventories. But not to zero.

Those living wills give you comfort? The worst case scenario they’re stress tested against is already in the rear view mirror. Market structure changes? I just spoke to a risk manager at one of those clearinghouses that Dodd Frank tapped as a panacea for OTC counterparty risk. He’s worried about his credit reserves being swamped. That’s just one catastrophic risk.

Don’t even think about what eurodollar futures are predicting about negative interest rates. What would that do to bank earnings?

The term “Greenspan Put,” once a snarky dig at Fed machinations, is now mainstream policy. The basic job of banks – allocating capital – is now seen as some quaint artifact of yesteryear.

No, the banks are not alright. Stop pretending they are. Shoes might not drop until the second half, but they’re already in the air.