But now cheap debt, the life blood of private equity, remains elusive. That means private equity firms need to use more of own capital to do a deal, lowering the internal rate of return of the investment. If the mix of debt and capital does not work, private equity backs off.

If income growth is negative, i.e., deflation, then real debt burden rises. 30-yr mortgage payments, for example, are fixed in nominal terms and become more difficult to meet as income declines. In this case, widespread default is likely.

The only thing keeping lenders from accelerating on the debt is the IP value in Gibson’s brand, which is associated with high quality products and commands respect in the industry, all of the sources said. “It’s not yet to the point that Gibson needs to restructure, but in the absence [of curing the default], part of me wonders if they are trying to stretch this game out as long as they can before the house of cards comes falling down,” one of the sources noted.

The Consumer Protection Agency might be a nice way to provide some education about finance to the average American, and help to reduce fraud, and increase transparency in consumer contracts,. However it had less to do with the cause fo the crisis than many other factors. Reducing leverage, re-regulating derivatives, maintaining adequate capital, separating insured deposits from more speculative activities are much more important.

It seems that each new proposal for reforming Banking and Wall Street is more banker friendly – and ineffective – than the previous one. They are milquetoast, meaningless, appeasing nonsense. The reformers are in a race to see who can offer up legislation that is least offensive to bankers.