Hard hit by the global financial crisis, a series of well-publicized lending and trading disasters, and now saddled with new regulations and capital requirements, once proud American banks have lost much of their luster.

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By buying assets, the Fed allows American banks to shed them, freeing scarce capital for fresh lending.

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How much, you might ask, do other American banks rely on such stakes, or on other capital-markets business that they may be ill-equipped to handle?

ECONOMIST: The bigger they are

By November 2007, when the narrative ends, it was already clear to Mr Morris that this crisis was much more serious than the last big crunch, the 1998 Russian debt default and the bail-out of Long-Term Capital Management, an American hedge fund, by a group of banks under the Fed's direction.

ECONOMIST: The credit crunch

While the banks might need five years to get these assets off their balance sheets, John Osbon, founder of Osbon Capital Management, foresees the American taxpayer being on the hook for said banks and assets for a decade.

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As businesses and markets grew, additional capital was needed, which was provided by another American invention: locally owned banks.

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The Europeans have gone along with this but may not be able to deliver, since their banks entered the crisis with much feebler capital cushions than their American counterparts.

ECONOMIST: A new chapter for the world economy, maybe

This stock will bolster capital more securely than the suspect hybrid stuff that American regulators are keen to inject into banks (see article), since its dividends can be cancelled.

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The other 14 banks American Express, Bank of America, Bank of New York Mellon, Capital One Financial, Citigroup, Fifth Third Bancorp, KeyCorp, Morgan Stanley, PNC Financial Services, Regions Financial, State Street, SunTrust Banks, US Bancorp and Wells Fargo received an unconditional green light from the Fed.

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