American Republic Online

This is cause for some concern:
FDIC Weighs Tapping Treasury as Funds Run Low

The FDIC has about $50 billion in reserves.  They will need billions just for Indy Mac.

Rest assured that more bank failures are on the way. True, they will mostly be smaller, local banks, but they will add up and put further strain on the FDIC.  Financial institutions have so far written down about $500 billion.  But that’s just bad mortgage debt.  That’s not the only bad debt out there.  In addition, as banks seek to regain their capitalization rates, lending will dry up.  And as pointed out before, the past few years have mostly been a product of mortgage equity withdrawals.  Without that, we would have seen negative GDP for 2 years.  I’m not trying to be doom and gloom, but we are not out of the financial woods yet.  We’ll work through it, but it’s not over yet.

For instance, Washington Mutual’s debt now trades at 20%, which is worse than junk bonds.  Regions, Wachovia, CitiGroup, GMAC, etc etc are all struggling.

“Investing” in Financials right now isn’t playing with fire, it’s playing with a T-Rex.  You might survive, if you run away fast enough…

Bennet Sedacca compiled and offers the following facts.  I don’t see this as a “these banks will fail” list, just some key, sobering, facts about some rather prominent banks.

Washington Mutual

• Equity has traded from $40 to $3.
• No preferred outstanding except convertible preferred.
• Debt trades in the 20-25% range.
• Cut the dividend to $0.01 per share in April.
• Has admitted they will lose money for the next several years.

Regions Financial

• Equity down from $40 to $8.
• Preferred Stock Trading at 10%.
• Debt trades in the 10-11% range, if you can sell it.
• Cut dividend by 75% in June.
• Needs to raise $2 billion, according to Sanford Bernstein.

General Motor/GMAC

• Equity has traded from $80 to $10.
• Preferred stock trades in 18% area.
• Short-term debt trades in 25-30% range.
• Long-term debt trades in 17% range.
• Eliminated common dividend in July.

Wachovia

• Equity has traded from $60 to $14.
• Issued a $3.5 billion “hybrid security” in February that now trades at 11%.
• S&P has stated they cannot issue any more hybrids.
• Sold 92,000,000 shars of a preferred stock in December at 8% that now trades $18 or 11%.
• Cut common dividend twice since February to $.05 a share or 90%.
• Debt trades at 9.5-10.5%.

CitiGroup

• Equity has traded from 60 to 9.
• Preferred Stock trades in 12% range.
• Outstanding debt trades in 12-14% range.
• Cut common dividend by 66%.
• Sold 91,000,000 shares of common at $11 in April 2008.

Needless to say, none of these are on my “buy” list…it’s not shaping up to be a nice couple of years for banks.