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U.S. Treasury Secretary Timothy Geithner last week proposed a series of programs, totaling $1.5 trillion, to bail out the U.S. banking system. Of course, Geithner hasn't told us precisely how he plans to spend the money, or identified which banks require such an enormous outlay.
So I thought it was worth looking at the United States' 12 largest banks to see where the problems might be and identify which banks might need big infusions of government cash. I perused the financial statements of all 12 banks, and also looked at their market valuations.
Unlike when the Troubled Assets Relief Program (TARP) was proposed in September – when the projections for potential losses were largely financial conjecture – we now have important concrete data on the banking system's troubles; namely, each of the bank's annual financial reports for 2008.
Will AIG be a good investment at this time? I understand that except for a couple of grey areas, the company is otherwise solid.
thanks
I agree that giving taxpayers money away, escpecially to large corporations is only delaying the inevitable. At which point we will lose all investment. just like the Auto industry. The money needs to be put into the hands of the people who will need to spend it. Small businesses and individuals. I am not talking about 3- 6 hundred either. Psolpe are not going to put hard earned money into anything if tey think they may not have a job next week. I personally will not purchase anything major such as a car even though mine is more than six… Read more »
Are you kidding me about BB&T "gladly [taking] more taxpayer money"? You are an idiot if you don't the former and present CEOs' philosophy? Does Ayn Rand ring a bell? Do some more research.
*don't know
I'm finding that I'm a late arrival to the apparently long line of people who find Martin's work knowledgeable, insightful and balanced . Great article, thank you Martin.
JP Morgan is a major short seller of gold and silver on the COMEX. Its silver shorts are more likely "naked" and illegal (even if the CFTC seems incapable of doing anything about it).
In spite of the short selling, the price of gold and silver has risen, presenting the possibility of a major short squeeze, a default, or God knows what else. Billions could be lost in this questionable operation, not to mention future criminal investigations.
Hi
I want to ask you with all these ZOMBIES walking around any of us that have saving limitted below amounts coverd by FDIC can get hit? if yes how and why does FDIC have fund to cover and would our GOVROMENT let this banks sink?
Know that American taxpayers are LENDING to banks (whether 'healthy' or distressed) at an interest rate of 0%! (ZERO percent !) Require those banks to structure every new loan and restructure every existing loan at a 2% to 4% interest rate (based upon income). 2% interest rates would save the average mortgagee about $600 every month, to spend as they will. This would 'free up' and cause the flow of $50,000,000,000 of 'extra spending money' into the American economy every month. The inherent byproduct of the resulting commerce is employment. This will also recreate housing demand and lead to restoring… Read more »
Excellent analysis and article, very informative.
What is the status of First National Bank of Omaha and HSBC?
Sharon
Since you have analyzed the top 12 banks in the US, why do you not take a look at foreign banks that operate in the US. For example, 4 of the big 5 Canadian banks operate through subsidiaries in the US and consistently make money. They also have high dividend yields and do not need either TARP or bailout money.
And what about Morgan Stanley, it seems to be ignored by the press including this article?
Your Chapter 11 solution for Citi and BAC is the first commonsense I've heard in this financial crisis. Thanks for the rest of the analysis also. Good post.
YOU MISSED THE BIGGEST GEM!!!!!
What about Northern Trust? Has to be the strongest financial services org out there. Climbing the list of banks ranked by market cap. Incredibly high quality loan portfolio. Hello?
Some of your 'hidden gems' and so-called solid banks like USBank did participate in the TARP and would be unlikely to shell out their promised dividends. Plus they may be severely limited by the current administrators punitive stance re: TARP funds.
But seriously, I would like to see a more focussed Think Tank put together to target this financial meltdown. I can't believe our best and brightest would not be able to come up with better solutions??
[…] Bank / Mortgage BailOut Increased to $1T… Or Maybe $2T Banks / Mortgages $1T Banks / Mortgages $1.5T Banks / Mortgages $2T US BudgetWatch on Stimulus, BailOut and Rescue Measures Looks Like Far More […]
BB&T took the bailout too it seems. Arguably, as they said, to remain financially competitive.
http://philanthropyjournal.blogspot.com/2008/10/despite-joining-bailout-bb-says-it.html
Let free mrkts solve problem. Create ETFs to buy toxic-assets & u create pricing mechanism quickly. Isn't that the uncertainty that is causing road-block to a resolution of systemic problems?
A very valuable well done analysis. Suggestion for sequel: how about similar story on most and least risky brokerages.
thanks much,
I bought BAC based on your Buy, Hold, Sell column recommendation – now I'm stuck with a "Zombie".
hmm. With this article and today's news about Citi wanting to offer itself up to the government, I am convinced that we are in for a world of hurt.
I agree with Mr. Knight!!!! The banks CAUSED this problem with a little help from the Credit Relief Act and THE BUBBLE BUILDER Himself, Alan Greenspan!!! And now the entire WORLD is suffering!!! America has caught the BLACK PLAGUE and it spread…The banks should either be ready and willing to restructure loans at 2-4% or be forced too! A little more help came from the real estate agents, the lenders and mortgage brokers to create this "Bubble" while earning fortunes in real estate sales commissions while hiding behind "CAVEAT EMPTOR." in the Life Insurance industry, there is something called a… Read more »
Thank you for this article Martin.
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If US Bank Corp goes below $10/share, like it did a week ago, I suggest you take every dime you got, and go long on it! You'll have a 4-timer on your hands in less than 2 years! This company is the best of the banking industry, and pays a great dividend in the meantime (where can you get 15% returns while 'hanging out' nowadays?)
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It is true. BofA is just a zombie. They claim there is no consumer demand for loans, but this is a lie. They are looking for any excuse not to lend.
So what if it is a zombie. The stock price doesn't seem to be affected so much. Everybody is all of a sudden high on BAC. So, what's up with that? Martin, are you scooping up sharers of BAC as you talk it down…hmmmmm?
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I know this comment is out of place and out of sink with anyone who would read this news letter but I feel it must be said. I look at a bank has a place to operate my business and personal finances from and not a place to invest into other then where I leave a little savings. They have become incredulous over the last 20 years. To the point of criminal. Their rates, terms, fee schedules, and policy changes have cause everything we have seen in these last 9 years with help of our government leadership which had their… Read more »
In reply to Sharon Warden of Feb 19,2009, her query–"What is the status of First National Bank of Omaha?" First National Bank Omaha was DENIED TARP funds, as was National City Bank just before it collapsed.These two banks were the ONLY TWO AMERICAN banks DENIED BAILOUT FUNDS, and ask yourself WHY were they denied TARP? Financial crimes? Is it insolvent? Yes, likely reasons. The entire sector died of debt years ago, and needs the taxpayer's money to continue to exist(and exist to fee the taxpayer to death!). PS:First National Bank Omaha's credit card APR in 2007 was 33%!!!!This was the… Read more »
Invest in Gold and Silver. Pure and simple. It's the only way you will ever see the colour of your money again in the future. Foreign countries are piling up on Gold. The currency of the Elite (the so-called top 1% of the top 1%) is GOLD AND SILVER. They laugh at the bogus fiat paper currencies of the world. Gold and Silver is the way to go. Any other investment is only worth the paper it's printed on. And, because most of it is digital these days, I should say any other investment is not even worth the paper… Read more »