The new Basel III banking rules will leave the biggest U.S. banks short of between $100 billion and $150 billion in equity capital, with 90 per cent of the shortfall concentrated in the top six banks, the Financial Times said, citing research from Barclays Capital.

The newspaper said the study by the investment banking arm of Barclays Plc (LSE:BARC.L - News) assumes the banks will need to hold top quality capital equal to 8 percent of their total assets -- a one point cushion against falling below the effective global minimum of 7 percent set in September by the Basel Committee on Banking Supervision.

The regulations mean banks may need to increase their capital through retained earnings or issuing equity or they can cut their risk-weighted assets by selling off assets and cutting back riskier business.

"These shortfalls are entirely manageable ... The more difficult question is what affect the new rules will have on the cost and availability of credit and bank profitability," the FT quoted Tom McGuire, head of the Capital Advisory Group at BarCap, as saying.

Broad stock indexes fell sharply in midday trading as concerns grew that the European financial crisis will spread.

Ireland formally asked for help from its neighbors over the weekend after falling into a financial crisis brought on by losses at the three banks the country nationalized. Details of the loan package were still being worked out, but Irish Finance Minister Brian Lenihan has said the rescue would not exceed euro100 billion ($137 billion).

It was the second time that the European Union has come to the rescue of one of the 16 countries that use the euro. In May, the EU and the IMF committed $140 billion to Greece to prevent the country from defaulting on its debt. Euro zone members have been willing to prop up each other's finances in hopes of avoiding a financial crisis that could cause the value of the euro to plummet.

Ireland's request initially pushed stocks higher in Europe. But the Euro Stoxx 50, an index of blue chip companies in countries that use the euro, fell 0.6 percent in afternoon trading there.

The Dow Jones industrial average was down almost 90 points in midday trading.

Ireland's request for assistance does not put an end to the questions facing the euro zone. Fellow members Spain, Portugal and Italy are also saddled with heavy debt burdens and investors fear that they may also need a financial lifeline from other EU members. The euro fell 0.8 percent against the dollar.

"It's been difficult for the European Union to get ahead and stay ahead of the market's concerns, despite the large sums they are clearly willing to dedicate," said Robert Tipp, the chief investment strategist for Prudential Fixed Income. Ireland's announcement that it would seek assistance contributed to stock losses because it was not detailed enough to restore investor confidence, he said.

The government is reportedly close to filing charges in the largest institutional insider-trading investigation in history.

According to initial reports, the investigation could ensnare Wall Street's biggest names: Goldman Sachs, SAC Capital, Wellington, Jennison, MFS Global, Maverick, Citadel, and others.

The investigation reportedly focuses on "expert networks" -- consulting firms that pay industry participants to share insights and information with investors. Professional investors use these networks to gather information about real-time business conditions and trends in various industries

No matter where the investigation ends up, the government will likely present it as a huge step toward making the market "fair" for small investors.  And the same small investors will likely view it as confirmation that the "game is rigged."

Both of these conclusions will miss a far more important point.

The REAL lesson most investors should take away from the largest institutional insider-trading investigation in history is that competition in the global financial markets is so intense that it's basically idiotic to trade.

Trading is what is known as a "zero sum game." To win, you have to beat the competition.

In our experience, most investors have no appreciation for how intense their competition is. They think, "Wow--look at all this information I have.  Look at all my trading screens. Look at all my SEC filings. Look at my charts and graphs. Look at the smart fellow on TV telling me what to buy. Look at how many of my trades have made money!"

What they miss is that their competition has all this information, too -- so it doesn't give anyone an edge. They also don't understand that, in addition to all this information, the folks they are competing with have millions and millions of dollars to spend gathering information that will never be published anywhere or appear on an screen or chart or graph.

That's where the expert networks come in.  That's where contact networks in general come in.  That's where one-on-one meetings with managements and suppliers come in.

One glance from a CEO in response to a pointed question can contain more information than 500 pages of SEC filings. One nugget of scuttlebutt about the status of an important contract can make you more money than 500 hours of studying charts and graphs.  Most small investors don't understand that their competition gets this sort of information all day long.

Doubts about the central bank's ability to expand its bond-buying program have driven Treasury yields higher.

Criticism of the Federal Reserve's latest bond-buying program, both from insiders and from U.S. politicians, is muting the plan's potential benefits for the economy.

Amid widely publicized skepticism about the efficacy and wisdom of the bond buying, investors and traders are questioning whether the Fed would be able to expand its bond purchases beyond $600 billion—even if inflation continues falling and unemployment remains high. Those doubts have contributed to an increase in yields on U.S. Treasury bonds since the Fed announced the program on Nov. 3, they say.

The criticism "has raised questions about the Fed's ability and resolve to control the yield curve," said Mohamed El-Erian, chief executive and co-chief investment officer of Pimco, the bond-fund giant. "The criticism has unsettled markets naturally inclined to worry about the politicization of the Fed and its loss of autonomy," he said.

The success of the latest round of quantitative easing, or QE2 as it is known, hinges on shaping public and market expectations. The more the public and investors believe the Fed is likely to keep buying bonds to depress long-term interest rates until the economy comes back, the more likely the markets are to keep long-term rates from rising.

Communicating a willingness to do more bond buying if needed despite dissent from inside the Fed and political pressure, primarily from Republican politicians and their advisers, is proving a challenge for Fed Chairman Ben Bernanke and a policy-setting committee with a diverse set of views.

The potential liability facing bankers arises from the $2 trillion in subprime, alt-A and option-adjustable rate mortgages that they underwrote and sold to investors, mostly as mortgage-backed securities during the home-lending boom of 2005 to 2007. The losses on the mortgages will be horrendous before the dust settles—over $700 billion on these and other so-called nonagency mortgage securities, according to New York mortgage-research specialist and broker Amherst Securities Group.

And now investors—from the federal housing giants Fannie Mae (NYSE: FNMA.OB - News) and Freddie Mac (NYSE: FMCC.OB - News) to major bond managers like closely held Pacific Investment Management and BlackRock (NYSE: BLK - News) —are fighting back. They are seeking to put back the mortgages to the banks from whence the investment flotsam came and force the banks to eat much of the mortgage losses.

The argument hinges on the arcane contract principle of representations and warranties, known as reps and warranties in legal jargon. Namely, did the mortgages go bad because of the unanticipated nationwide collapse in home prices (a so-called exogenous factor) or are the banks responsible for the mess because they "misrepresented" to the mortgage purchasers the shoddy quality of the mortgages they put in securities and pools?

lready some of the buyers have enjoyed a modicum of success in their putback efforts. Fannie Mae and Freddie Mac have managed to return over $13 billion in defective mortgages and are gearing up to do even more. Before it's all over, the banks may have to swallow more than $30 billion in losses from Freddie and Fannie putbacks alone, according to an estimate by the Washington, D.C., mortgage-research boutique Compass Point Research & Trading. That's because no bank in the mortgage business can afford to play hardball with secondary market behemoths like Fannie and Freddie, the government-sponsored enterprises (GSEs) that own or guarantee about half of all home mortgages in the U.S.