Crisis won't end until reality returns

Investors are feeling better about financial companies' balance sheets than they were a few months ago. That's not to say they have a lot of confidence in them.

Compare, for example, the stock-market value of Regions Financial Corp with the bank's reported net worth. At $3.97, the Birmingham, Alabama-based company's stock is up 69 percent since its February low, giving Regions a $4.5 billion market capitalization. That's still only a third of the $13.5 billion book value it showed as of March 31. In the market's view, the bank's asset values remain grossly overstated.

The same story is playing out across the financial-services industry. Financial stocks in the Standard & Poor's 500 Index rocketed 35 percent during the second quarter, fueling the index's biggest quarterly advance since 1998. Yet for hundreds of US banks and insurance companies, a vast credibility gap remains when it comes to their accounts.