When the credit cycle turns, suddenly all of the assets you thought you had disappear, where you suddenly have liabilities that you weren’t aware of. However, if you put all of the numbers in a spreadsheet and see how far off the assumptions have to be before there is a big problem, they have to be very far off.
One thing about the SOE’s is that because the government has equity stakes in the companies, it can force the companies to disgorge retained earnings if it really needs to. So along with “hidden liabilities” there are also “hidden assets.” However, some of the assets are certainly “fluff” but again, if you put in the numbers you would need for the assumed numbers to be very off in order to have a crisis.
Something interesting about the American system of corporate finance is that large companies in the US do not have large retained earnings that allow them to cushion shocks. The reason for this is that any corporation with large cash reserves is going to be the target of a corporate raid. As a result American companies rely on a system of “just in time financing” and debt financing from banks and the securities markets. The theory behind this is that it makes the companies more efficient and allows them to function with no capital reserves. This is true. However the downside of this is that the system requires there to be functioning capital markets and if you have a frozen capital market, then it’s like turning off the power.
My guess is that the United States will end up with a system in which you have some mega-banks that are essentially public utilities delivering cash in the way that the electric companies deliver power.