Bank stocks plunge on fresh insolvency fears

AP / Yahoo News ^ | Thursday January 15, 2009 | Stevenson Jacobs, AP Business Writer

[gpk9]

NEW YORK (AP) -- Shares of major U.S. banks plunged Thursday as the government mulled giving Bank of America Corp. a fresh multibillion-dollar aid package, raising fears on Wall Street that the battered financial sector may need an even bigger bailout.

Bank of America shares fell as much as 28 percent -- dropping to their lowest level in 18 years -- on news that the bank may seek another capital injection to manage losses from its takeover of Merrill Lynch. Citigroup Inc. shares fell to a near 16-year low as investors braced for horrible fourth-quarter earnings due Friday. And JPMorgan Chase & Co. added to the pessimism with a grim earnings outlook. Shares of all three banks came off their lows later in the day as part of a broad market turnaround.

Still, the carnage fanned investor fears that mounting bank losses and a darkening economic outlook are thwarting government efforts to resuscitate the banking sector. It raised the distinct possibility that the largest financial rescue package in history may swell even further.

"The perception on Wall Street is that things are getting worse and that the banks are bearing the brunt," said Jack A. Ablin, chief investment officer at Harris Private Bank in Chicago.

[snip]

[gondramB]

Unfortunately, it sounds like you have a point.

[gpk9]

"If they go insolvent, does that mean that my mortgage and any balance on my credit card are forgiven? "

I rather doubt it. Both of those are assets to the bank. They have some value to someone. I suspect if BoA goes under, those assets will be sold off to someone else, a normal part of the bankruptcy process.

However, I also suspect that BoA will not be allowed to go bankrupt, but will be handed all the taxpayer dollars they desire to stay solvent.

... doesn't matter though. They'll eventually go bankrupt anyway, along with just about everyone else, when the dollar crashes.

[lonevoice]

Bank of America ping

[ConservativeMind]

Please explain how a libertarian or Objectivist, is by default, a “looter.”

[ConservativeMind]

No, it would by much cheaper for the FDIC bailout.

The limits were only up to $100,000 an account. It is now $250,000.

I’d much rather those accounts are covered via the FDIC than hundreds of billions supporting asinine management of stupid firms.

[gpk9]

Here's another one folks:

Citigroup stock plunges near 16-year lows

Citi shares tumble as investors await grim fourth-quarter results and business sale plans

Hmmm.... do I sense an avalanche beginning?

[ichabod1]

looters to the right of me, moochers to the left.

[TheWasteLand]

I was not saying that Randians are looters, but rather that those running these firms are like the looters Rand described (”Randian looters” = looters in the Randian usage).

[Fox_Mulder77]

The banks going bust would be much, much worse than inflation induced by the bailout cost.

I guess the question is: Will the banks go bust even after given a few bailouts?

This is not a situation that money can fix. This is a mismanagement problem from top to bottom: Wall St./D.C./Main St.

[ConservativeMind]

Well, that is reasonable!

[whatshotandwhatsnot]

THE major reason I stopped doing business with them.

[gpk9]

"I’m really beginning to wonder if we’re going to see runs on banks and bank “holidays” in 2009."

I suspect we'll see one ...ohhh... I'd say... within 24 - 48 hours of Obama's inauguration.

[GrandmaPatriot]

Yes and it couldn’t happen to a more deserving institution. I just fear Paulsen will come riding to the rescue of BoA again.

[gpk9]

Here is a great Fox News discussion of the current situation with Bank of America. It's on YouTube. I highly recommend viewing it:

Bank of America Update

[EGPWS]

Was BOA the bank that was handing out credit cards and banking accounts to people who could not prove they were legal cititzens and no credit history needed?

Wasn't it ALL banks handing out credit to credit handling dysfunctional recipients via order of dictate from Washington?

[egannacht]

What if they gave us the money back then?

[Frantzie]

Odd how the Canadian banks are almost unscathed.

They may be the strongest banks in the world right now.

[Frantzie]

Bank of America is being hurt because all the illegals they lent to are DK on their mortgages, leaving the U.S. in new pickups with flat screen TVs etc.

[gpk9]

"... so the extra bailout money is perhaps only fair."

I believe we are swiftly approaching the point where people are going stop caring about "fair" and start caring about their financial survival.

[blam]

"Of does it just mean I’m screwed and a sucker for always playing by the rules and have been responsible... The government is rewarding incompetence and failure, and punishing people for their achievements."

Yup.

Just sit on your front porch, do nothing and get fat while people bring you free stuff for voting correctly.