Suddenly, banks are back in the news, and it is very bad news. Two of the three largest US banks, Citigroup and Bank of America, despite huge bailouts 2-3 months ago are once again starting to fail. How much the Obama administration will put in to keep them going is unknown. However, cash injections will probably come with conditions not favorable to common stock owners.
Regional banks are faring no better, SunTrust, FifthThird, Regions Financial, Zions and many others are all off 70% or more for the last 52 months with common stock trading lower than last November.
Nouriel Roubini the famous New York University professor says the US Banking System is insolvent with another $3.6 Trillion in losses coming. Yes, he is know as “Dr. Doom” but then again, he has been consistently right so far.
The fear is that financial institutions are nowhere done needing government help and the dilution of the equity will wipe out common share holders and threaten bond holders as the government takes preferred stock positions in front of everyone else. There is talk again of actually buying the toxic assets (thought we dropped that as a “bad idea”). Problem is, declining real estate values, both residential and now commercial, are causing more and more loans to go toxic each day. Credit card and consumer debt is also starting to go bad as deflation takes hold.
Banks are using government money to strengthen their balance sheets. They are doing very little new lending, so cash injections are not helping Main Street.
The news from Europe is terrible also. The Royal Bank of Scotland shares have plummeted. Deutche Bank are Barclays are all down big time. Talk of Nationalization is now heard in Europe. On Tuesday January 20, 2009 Allied Irish Bank (AIB) was down 60% that day alone to $1.5 a share. Allied Irish was as high as 47 within the last year.
How will it all end? Who knows. Perhaps a total reorganization of the banking system, certainly much more nationalation. More tax payer money for sure will be put in, again increasing the deficit dramticly. TARP2 isn’t near enough. Worse case scenario: maybe a worldwide bank holiday (you can’t withdraw your money).
Regional banks are faring no better, SunTrust, FifthThird, Regions Financial, Zions and many others are all off 70% or more for the last 52 months with common stock trading lower than last November.
Nouriel Roubini the famous New York University professor says the US Banking System is insolvent with another $3.6 Trillion in losses coming. Yes, he is know as “Dr. Doom” but then again, he has been consistently right so far.
The fear is that financial institutions are nowhere done needing government help and the dilution of the equity will wipe out common share holders and threaten bond holders as the government takes preferred stock positions in front of everyone else. There is talk again of actually buying the toxic assets (thought we dropped that as a “bad idea”). Problem is, declining real estate values, both residential and now commercial, are causing more and more loans to go toxic each day. Credit card and consumer debt is also starting to go bad as deflation takes hold.
Banks are using government money to strengthen their balance sheets. They are doing very little new lending, so cash injections are not helping Main Street.
The news from Europe is terrible also. The Royal Bank of Scotland shares have plummeted. Deutche Bank are Barclays are all down big time. Talk of Nationalization is now heard in Europe. On Tuesday January 20, 2009 Allied Irish Bank (AIB) was down 60% that day alone to $1.5 a share. Allied Irish was as high as 47 within the last year.
How will it all end? Who knows. Perhaps a total reorganization of the banking system, certainly much more nationalation. More tax payer money for sure will be put in, again increasing the deficit dramticly. TARP2 isn’t near enough. Worse case scenario: maybe a worldwide bank holiday (you can’t withdraw your money).
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