Bank Stress Test Proof Positive

Some folks will look at a glass and say that it is half full and others will look at it as half empty. In the case of the banking industry you need to look at the glass and see that certain people will not be sipping from the glass anymore.

If I were one to have disposable income, and I do not, if I did, then I would be buying stocks in these troubled banks as fast and furious and as much as I could. Holding said stocks for five or more years and then taking a profit as investors will do. Over at MSNBC they have this little piece on the survivability of and stress test our largest and not so large banks in America went under the knife by the Federal Reserve…

Among the 10 banks that need to raise more capital, Bank of America Corp. needs by far the most — $33.9 billion. Wells Fargo & Co. needs $13.7 billion, GMAC LLC $11.5 billion, Citigroup Inc. $5.5 billion and Morgan Stanley $1.8 billion.

The five other firms found to need more of a capital cushion are all regional banks — Regions Financial Corp. of Birmingham, Ala.; SunTrust Banks Inc. of Atlanta; KeyCorp of Cleveland; Fifth Third Bancorp of Cincinnati; and PNC Financial Services Group Inc. of Pittsburgh.

The banks will have until June 8 to develop a plan and have it approved by their regulators. If they can’t raise the money on their own, the government said it’s prepared to dip further into its bailout fund.

The stress tests are a big part of the Obama administration’s plan to fortify the financial system. As home prices fell and foreclosures increased, banks took huge hits on mortgages and mortgage-related securities they were holding. - MSNBC

In my honest opinion the banking crisis is over and the only way all of this financial mess will be cleared up is by the banks themselves telling the American people that “We will be Okay!” When they tell the government and the rest of the financial industry that they no longer need assistance is when the crisis is officially over. It has to come from the CEO’s lips of each bank rather than a statement from the White House in a hurried press room briefing.

Citigroup will be fine, Bank of America will be fine. The true test isn’t in a hypothetical situation presented to the balance sheets of these banks by the Federal Reserve but by the actions of the people running the banks. The government has their backs respectively to ensure our economy is sound, now it is up to the big boys and girls running the big banks to scream at the top of their lungs that they will survive this crisis. Act accordingly to make sure that the institution they represent is around for another couple of decades if not more. Only then will the investment dollars start buying up cheap banking industry stocks that in less than a few years will make the oil industry profits look disgusting for investors today.

Now is the time to get back to the basics of what a bank should be doing, should have been doing, and should have not been doing. And for investors to make some long term stock picks in the banking industry that will not be allowed to fail.

Papamoka

Financial Market Time Bomb

Latest reports from Hank Paulson over at the U.S. Treasury is that the U.S. Government is going to financially prop up banks but there is a catch. They want stock in return for the favor. I suppose that is better than handing the banks a check and getting a toaster in return for it. Doing the math the deal works out to 15,555,555 toasters at $45 a piece. I don’t think Uncle Sam could ever sell that many toasters on Ebay without greatly affecting the world wide toaster markets so I‘m good with that deal.

For all of you folks following the markets and politics, Rachel Maddow has this interesting video on it…

Video Link



Is it just me or does it not make sense to anyone else for the McCain campaign manager Rick Davis to make a statement like he did in the above video?

“There’s very little a candidate for President, and frankly, after watching today, very little even the President can say about what’s happening in the stock markets other than to hope that they correct themselves.” - Rick Davis

Is it possible that Rich Davis is a “Closet” Obamaican? Then when asked why John McCain or Sarah Palin are not talking about the markets he had this to say in the above referenced video…

“I don’t know if you really want to turn a campaign into a CNBC News show on the stock market. I mean it doesn’t mean that we don’t care and aren’t trying to do something about it. It’s just I’m not exactly sure what you would say everyday.” - Rick Davis

If for no other reason, both candidates need to be talking about this issue every single day for a reason. To instill calm in the markets should either one of them become President. Well it turns out that Obama is talking about it in a logical way that will support new jobs in the small business markets. Just like after 9/11, making credit available to the thousands of small businesses that needed to either rebuild, restructure, or start all over again. It also turns out that John McCain is talking about it but his plan leads to panic in the markets. McCain is proposing, take a deep breath, suspending the “Regulations” (I never saw that one coming…NOT!) to allow people to draw out their 401K and IRA’s without penalties?

One plan builds up small businesses, the other puts a rush by millions all across America to dump their stocks, bonds, and every other investment vehicle for the old Mattress Savings Bank.

Just something to think about over the weekend. John McCain himself has said in the past that he knows nothing about economics and his latest plan would in fact put a full run on banks, company 401K’s, and investments in any form of retirement fund. Common sense dictates what would happen if the penalties for early withdrawal were suspended.

Papamoka

Bailout Quagmire Courtesy of John McCain

John McCain suspended his campaign to do what most legislators in Washington D.C. do, nothing! He could have done that from the campaign trail. Instead, he declares this banking industry and Wall Street crisis his top priority so he can go the White House and offer nothing to the equation. Did he or did he not say that he was going back to the capitol to end the bipartisan debate and fix the problem? Instead we get more of McSame only this time he’s not even taking sides with his President or the bipartisan group that has put together this bailout package.

Shaking my head in disbelief but this is what Reuters has to say on it…

Angry W. House meeting roils Wall St bailout talks
By Kevin Drawbaugh and Thomas Ferraro

WASHINGTON (Reuters) - Negotiations in the U.S. Congress toward a massive bailout for Wall Street fell into disarray on Thursday night after a contentious White House meeting, with lawmakers later offering conflicting reports about the position of presidential candidate Sen. John McCain.

The White House meeting -- attended by McCain, Democratic rival Sen. Barack Obama, President George W. Bush and lawmakers from both parties -- "devolved into a contentious shouting match," according to a statement from the McCain campaign.
"At today's cabinet meeting, John McCain did not attack any proposal or endorse any plan," the statement said.

Senior Democrats said they came away from the afternoon White House session with the impression that McCain was backing an entirely new Wall Street rescue plan, one differing markedly from a Bush administration proposal under discussion for days.

Massachusetts Democratic Rep. Barney Frank, chairman of the House of Representatives Financial Services Committee and a participant in the White House gathering, said negotiations could be set back by the confusion.

"House Republicans, in some kind of arrangement with McCain, went off to wherever. I don't know whether they're ready to negotiate this. Their thing was some totally different mortgage insurance plan ... that would clearly delay this for a week or more," Frank told reporters. - Reuters

Hold the freaking presses. Let me get this straight… President Bush, Senator Chris Dodd, Represenatative Barney Frank, Secretary Paulson, Fed Reserve Chairman Bernake had a working proposal pretty much agreeable to all parties and McCain stepped into the equation and squashed it? To back an insurance plan?

Anyone that knows insurance knows that it is always in favor of the house, just like the odds favor the house in Las Vegas! So we have the Maverick Senator from Arizona coming into the discussion, the Conservative right wing general of his party, the less government, less regulation is best candidate, and he backs a never ending mortgage insurance plan on the backs of the American people? How sweet of a big business, big banks deal is that? Let’s not only put the taxpayers in for $700 Billion Dollars but lets make this pig fest into a never ending feed trough!

John McCain has just shown where his loyalty is and it is not in the interest of homeowners or soon to be homeowners. Now on top of PMI (Private Mortgage Insurance) you will get a double dipper with MMI (McCain Mortgage Insurance) because Wall Street has not raped the American people enough.

Mind you, this insurance that McCain is backing isn’t because you as a homeowner made bad decisions, it’s because the people making bad loans on Wall Street might continue making bad decisions and it’s only fair that all of us be punished for it. Pass out them golden parachutes and screw you Joe Q. Voter.

Vote Obama and vote often!

Papamoka