The Banks, The Fed and The Easter Bunny!
Thursday, April 9, 2009
Wells Fargo predicst $3B profit
The banking sector received some welcome good news today, as Well Fargo predicted a $3 billion profit for the first quarter. The announcement caused the bank's shares to climb nearly 32 percent in early market trading, according to reports. Wells Fargo issued guidance for the first quarter, saying it expected to report net income of approximately $3 billion, or 55 cents per share, significantly higher than analysts' estimates of 28 cents per share. Among the reason for the bank's resurgence are its traditional banking and mortgage businesses. Mortgage applications reportedly increased dramatically to start the year, and Well Fargo funded over $100 billion in mortgage loans through the first quarter. Finally, Well Fargo also attributed their success to the fact that customers concerned about Wachovia's health after the bank was purchased by Wells Fargo have been returning, helping to drive both loan and deposit growth.
The Fed has now taken over the Banks and in so doing is creating fairly tales in order to regain public confidence. Think about it, during the 4th quarter of 2008, we watched the Bear Stearns hedge fund implode, then watched as Lehman Brothers fell like a 100 yr old building being demolished and the parade of buyouts including such icons as Merrill Lynch, Washington mutual and Wachovia to name a few. The Market lost over 50% of its value an early in the first quarter of 2009 Citi-Bank fell below one dollar. Now any big board company that falls below a dollar is (according to the rules) to be taken off the board. Of course the rules were relaxed for Citi and then the chief fairly tale writer Timothy Geithner released his plan to save the Banks. Of course coincidental to his pained plan Citi (who was trading at penny stock prices) came out with a projected Q1 profit (this by the way was long before any so-called upsurge in the housing market could have possibly taken place). Of course the market rallied on this news and Citi jumped over the $2.50 range (now trading in the $3 range, can you say ENRON).
3 weeks later the market surge was once again falling back so right on time the above announcement is made, just in time to have an Easter break rally for the market (can you say ENRON!).
To really core down on this, you have to understand what the TARP deal really is and why the Banks have to be subservient to our friend Timothy Geithner.
Please see the following:
Federal regulators have told the nation's largest banks to keep quiet about their performance on government stress tests. They fear investors could punish companies with nothing to brag about.
In letters to the 19 banks undergoing tests of their financial strength, regulators told the companies not to disclose their performance during upcoming earnings announcements, according to industry and government officials who requested anonymity because they are not authorized to discuss the process.
The order was the latest in a series of government moves designed to keep good news about strong banks from dooming others to a downward spiral of falling share prices and financial weakness. If banks receiving the highest marks trumpet their results, the fear is investors might push down share prices of those companies that make no such announcements.
Government officials want to announce the results all at once, at the end of the month.
The stress tests are a centerpiece of the Obama administration's ongoing effort to stabilize the banking industry. They subject the banks' books to a series of negative scenarios, including double-digit unemployment and further drops in home values.
The test results will help regulators determine which banks are strong enough with current subsidies, which need more money from the government or private investors, and those not worth saving.
The letters follow public statements from bank executives about the tests, including Wells Fargo & Co. Chief Executive Richard Kovacevich's calling the process "asinine." Bank of America Corp. CEO Kenneth Lewis and Citigroup Inc. CEO Vikram Pandit both have alluded to strong performance on separate, internal stress tests in recent memos seeking to build employee confidence.
Lewis also told reporters last month he expects Bank of America to pass the government's tests.
Wells Fargo has received a $25 billion government bailout; Bank of America and Citigroup each received $45 billion.
Spokesmen for the Federal Reserve, Bank of America and Citigroup would not comment on the issue. Wells Fargo spokeswoman Julia Tunis Bernard said the company doesn't comment on discussions with regulators.
The letter echoes earlier government moves to use strong banks as cover for those that need more help. For example, then-Treasury Secretary Henry Paulson forced the nine largest banks to take capital injections all at once last fall so the neediest banks wouldn't be stigmatized.
The Securities and Exchange Commission on Wednesday opened a public debate on how to prevent downward pressure on stocks from investors betting against their performance -- a practice called "short selling." Critics of the practice, including many in the financial industry, blame short sellers for causing much of the panic that engulfed financial markets last fall.
Industry groups also have groused about regulators forcing healthy banks to take bailouts. Some smaller banks already have returned the government's money -- plus interest -- because they were unhappy with new conditions Congress had imposed. Large banks, including JPMorgan Chase & Co., Morgan Stanley and Goldman Sachs Group Inc., have said they want to return the bailout money as soon as possible.
Can you say ENRON! Once again there is a market manipulation with fixed accounting information. How can the Banks be profitable at this moment? If anyone could possibly believe this then they have to believe in the Easter Bunny as well. In fact there is more credible evidence of an Easter Bunny. This is an obvious money grab and now not only does the government want us to fund its excess with our tax dollars, it also wants us to fund the total bailout of the Banks with the last of our own personal wealth! The government wants us all to be greedy enough to believe that the incredible economic mess created by the banks and housing industry is somehow a recession. It is not a normal recession, it is a failed ponzi scam that fell apart when as bond market (more debt then necessary) was falling apart (still is by the way, and is possibly the BIGGEST bubble yet!) Do you understand that AA bonds (formerly platinum in their guarantees) are now no better then a JUNK BOND was 7 yrs ago! These very same bonds are the basis of the Insurance companies’ investment portfolios. Insurance companies have long been the financial staple of our economy due to their reserve basis (they actually have to have more assets then liabilities, imagine a financial institution that actually has to play by REAL accounting principles!) and now they are crippled with investment portfolios that are leaking a potential bond implosion. Yes, there is some bad news still to come. The present money grab is simply to get the wealth back into the market before the bond markets collapse. Please start reading between the lines and protect your personal wealth or whatever is left of it. I am a free market believer, yet I also believe the market should not be fixed by the government to make over their incredible mistakes!