Top 10 at 10: Dangerous glimmers of light; Citi and BoA told to raise capital; Gaussian copulated

Here's my top 10 links from around the Internet at 10am. My apologies for not producing one yesterday. All a bit hectic, I'm afraid. I welcome your suggestions below. 1. This front page picture from the Economist simply cannot be ignored. The article with it is excellent too. Here's a taste.

This weekend many of the world's finance ministers and central bankers will meet in Washington, DC, for the spring meetings of the IMF and World Bank. Amid rising confidence, they will be tempted to pat themselves on the back. There is no time for that. The worst global slump since the Depression is far from finished. There is work to do

2. WSJ.com is reporting that the US Federal Reserve has told Citigroup and Bank of America to raise fresh equity capital after stress tests revealed (well, leaked...) that America's two biggest banks weren't as healthy as first thought, particularly if unemployment soars. Who would have thunk it? America's biggest banks are insolvent. 3. This powerline blog, which is from a right wing think-tank in the US, makes a persuasive case that the US Treasury and US Federal Reserve have pledged up to US$3 trillion of taxpayers funds in the TARP, which was supposed to only hand over only US$700 billion to banks when Treasury approved the plan. 4. Private jet sales are likely to halve next year to around 600, Bloomberg reports. Too bloody right. 5. Another useful story from thedeal.com here showing CDOs are having an all new toxic side effect: they're frustrating attempts to put companies into bankruptcy protection so they can be fixed. Here's a taste. HT Felix Salmon

Emboldened by credit default swaps, bondholders in other restructurings have resisted efforts to reduce the amount of money they are owed or refused to accept offers to swap debt for equity in hopes of at least sweetening the deal after a bankruptcy filing. They also are fighting to reserve their right to CDS payoffs, bankruptcy experts and analysts said. The prevalence of credit default swaps has been blamed for at least worsening the financial crisis. Now they are complicating efforts to clean up balance sheets, ease debt burdens and unwind the tangle of financial obligations between financial firms and their counterparties -- critical steps in reviving the economy.

6. The backlash against US Treasury Secretary Tim Geithner is building. Here is the New York Times, a supporter of Obama, unloading on poor Tim in this massive and unflattering profile. He'll be gone by Christmas, I reckon. Here's a taste.

Even as banks complain that the government has attached too many intrusive strings to its financial assistance, a range of critics "” lawmakers, economists and even former Federal Reserve colleagues "” say that the bailout Mr. Geithner has played such a central role in fashioning is overly generous to the financial industry at taxpayer expense. An examination of Mr. Geithner's five years as president of the New York Fed, an era of unbridled and ultimately disastrous risk-taking by the financial industry, shows that he forged unusually close relationships with executives of Wall Street's giant financial institutions. His actions, as a regulator and later a bailout king, often aligned with the industry's interests and desires, according to interviews with financiers, regulators and analysts and a review of Federal Reserve records.

7. Oh boy this is fascinating. The New York Times turned up the personal diary of Geithner in a Freedom of Information Act request. And then they asked bloggers to comb through it for gems. The new collaborative journalism at work. I wonder what Alan Bollard's would look like. Maybe not so busy...I bet the lunches were cheaper too. 8. A beautiful piece of financial journalism from Sam Jones at the FT on Chinese born mathematician David Li and his Gaussian Copula formula, which was used to build up the massive credit bubble of 2008. It could be called the formula that killed the global economy. Read it (it's long be warned) and weep. It extends the piece by Felix Salmon in Wired in February. Here's a taste.

CDOs built solely out of subprime mortgage debt became the rage. And using the magic of the Gaussian copula correlation model, and some clever off-balance-sheet architecture, high-risk mortgages were re-packaged into triple-A-rated investor gold. The CDO market exploded. In 2000, the total number of CDOs issued were worth somewhere in the tens of billions of dollars. By 2007, two trillion dollars of CDO bonds had been issued. And with so many investors looking to put their money in debt, that debt became incredibly cheap, fuelling a massive boom in house prices and turbo-charging the world's economies. The unwinding started, as we all now know, in the US subprime housing market. Defaults started to increase in late 2006. The banks weren't worried at first. Their models assumed that the pinprick default points all over the US were not correlated. But the defaults kept coming. By early 2007, it was clear that the US subprime market had a problem and by that summer, homeowners all over the US were defaulting on their mortgages. The cheap debt made available by the finance revolution was so cheap, in fact, that the loans should never have been made. And the correlation model was still mapping the housing market as it had been in 1990s, not the grossly inflated monster it had become. The development of the model had, ironically, changed the nature of the reality it was modelling. The losses the banks began to take against their holdings of CDOs were staggering. And as the institutions grew fearful about one another's solvency, they stopped lending to each other. Global liquidity dried up. The rot spread from asset class to asset class, and the banks' pain spread to the real economy. Suddenly, everything was highly correlated.

9. I love an obscure statistic to help explain what's happening in an economy. This shows tonnage carted by truck in the United States. It shows a steepening fall in March after some apparent recovery in January and February. HT Calculated Risk 10. The scale of the US government borrowing in the next three months is enormous, as pointed out in this piece by Tyler Durden at ZeroHedge.