Tuesday, September 22, 2009

While US banks profit, political officials want to see their aid translate into a real recovery in lending

SHOOT: Instead, aid is translating as bonusses and share prices rallying spectacularly. I guess the bailourt worked [for them anyway].
clipped from seekingalpha.com
The financial shares that were in the deepest trouble in February have also rebounded the most with the powerful surge in stock markets from their low in March 2009 (+60% in Europe and the U.S.).
Banks whose solvency ratios dipped to dangerously low levels have enjoyed spectacular rallies: Bank of America (BAC) +610%, Citibank (C) +400%, RBS (RBS) + 475%, Barclays (BCS) + 640%, Fortress (FIG) +650%.
Moreover, certain banks are hindered from smoothing losses over time due to their practice of making debt to equity swaps with their stressed clients, thereby converting them into shareholders of major real estate developers and building societies or direct owners of land and buildings.

While the FDIC has “only” 400 banks on its short watch list, IRA has given an F, its worst rating, to 2,256 of them. As such, it estimates that the FDIC’s cumulative losses could climb to $400bn to $500bn, while its security cushion has contracted from $60bn to $10bn since last autumn.
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