How should we interpret the massive investments from sovereign wealth funds being taken by UBS, Citi and Morgan Stanley to shore up their capital reserves? Just when the central banks are making huge amounts of liquidity available cheaply, why are these banks going elsewhere for capital? This seems strange: the public is trying to force cheap money into your pockets, and you go elsewhere to shore-up your balance sheet. Are the Chinese and Gulf States offering even cheaper money?

Not likely. Banking shares have fallen sharply, indicating that equity finance is very expensive at the moment. In fact, you can expect that the new part-owners have negotiated very good terms. The banks are taking money when they need it - always a sign that they'll get it over a barrel.

The deals with sovereign funds can mean just one thing: that the credit crisis looks much worse from the inside than it does even from the outside. If the banks just needed to be seen through a 3 month bad patch, then they would go to the central banks for cheap, non-dilutive funding. That they have not done so, and brought in new part-owners at the worst of times from the stand-point of negotiations, means that UBS, Citi and Morgan Stanley see the credit crisis continuing.

Expect a rush to find foreigners with deep pockets.