"The bank probably needs to maintain a tangible equity ratio of 6% to 9%, he said. 'It would take over $80 billion of new common equity to reach even the low end of the range, and we believe Bank of America simply is not generating sufficient capital internally in this environment to put a dent in this size capital hole.'" 10-1+ banking could be over, if BAC went to 6-1 just where they would get all that capital from? http://www.marketwatch.com/news/sto...x?guid={FAA01409-AE6B-418D-84A7-88C97F7C8AA5}
Peter Schiff said banks are worthless. Right now the financials make up 10% of the s&p, what if it becomes 1% or even 0%. What would the s&p be worth?
I think people are forgetting that the federal funds rate is at 0! Banks are not having capital issues, this selloff is all about the government trying to nationalize them.
I think there's a lot of money to be made on the upside bet, even though its not popular at the moment. There's plenty of very viable banks out there that have poorly performing stocks (USB, PNC for example), all the same. I think this selloff is all about the blackhole of uncertainty (Which WILL end soon), the doubt about geithner being accepted tommorow, and irrational fears of total sector nationalization and equity confiscation (won't happen in the US)... etc.
The problem with banks is..in no particular order.. 1) partially nationalized Industry..not an enticing for private investor (see, airlines, autos, education, etc.. 2) The whole concept of a bank is to pickup quarters in front of bull dozer..banks make no money of depositors, and their money making machine is dead. 3) Whenever a crisis hits banks it blows out the profits for the last decade. 4) In Sept - October a run a banks was an increasing probability. Then the FED came to the "rescue" and it calmed down. We are now 8-10 trillion worse off in the span of 3 months, and we are still in crisis. Bank Run is now even greater risk than before. 5) Banks get to look forward to even more 20 something regulators with no clue, and overeaching powers on the way. So if you are a healthy private bank who played by the rules, now you face 1) Well Funded sociopathic competitors with government pockets 2) More regulations 3) Demoralize customer base ready to run out the door. I believe we are inching towards a fully nationalized banking system. It can happen and we now have a President who will do it in the name of all that is blessed. If we have another major bank failure, and the mega banks continue to fall. The governments hand will be forced. We continue to face the same two paths for months. Continue with nationalization or step back and allow banks to fail. We are so far in, we don't know up from down. At this stage, do you think we are going to stop? This is not a crisis of credit it is a crisis of faith and solvency. And the only way you can regain lost faith is through coercion.
The problem the banks have is they lent good money to lowlife. Like those that voted for the new prez. More trouble behind, more trouble ahead.