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Crunched balance sheets, wafer thin capital, toxic MBS - it’s all so Q1 2008 at Barclays Capital, according to the tone and substance of recent reports.

Here’s a summation of a Telegraph story on Tuesday:

- Barclays issues new stock, worth about 5 per cent or £1.35bn, to a couple of strategic investors, such as China Development Bank and Temasek, who got burnt last year in preparation for the abortive bid for ABN Amro. It’s a chance to average down, with the pair having bought in last July at 720p.

- A further 5 per cent would be offered to other shareholders (think of a clawback structure -  opportunity to average down also applies).

- Barclays simultaneously goes and buys a big international rival, such as Lehman Brothers (£13bn) or UBS (£34bn), hugely expanding Bob Diamond’s BarCap empire in the process; alternatively, Barclays performs a “mercy killing” of a small UK mortgage bank (maybe Alliance & Leicester).

Utterly, comically, off-with-the-fairies fantastical? Not so fast. Says the Telegraph’s Katerine Griffiths:

Guiding Barclays’ decision is understood to be a consideration about whether to try to take advantage of rivals’ weakness by launching a large rights issue with a double purpose: to improve its capital ratio and to fund an acquisition.

Barclays’ top team feels it has earned kudos with the City by walking away from last year’s battle for ABN Amro, which was bought by a consortium led by RBS for £47bn. Barclays is thinking seriously about whether it can snap up a rival bank at a time when the shares of many banks are at record lows.

Having missed out on top jobs at Citi and Merrill Lynch, the suggestion now is that Bob Diamond wants to go on the offensive with an aggressive expansion of Barclays Capital.

Shares in Barclays dipped 7p to 406p during early trade on Tuesday - that’s just 3.5 per cent above the low struck in mid-March amid the Bear Stearns collapse. Clearly, some in the financial world fear this all might come true.

Related links:
Barclays considers daring takeover bid in the US or UK - Telegraph
Lex on Barclays’ silence