Are US Banks Headed Off A Cliff?
The nation’s 2nd largest lender, Bank of America, has been warned by US regulators that the company could face a ‘public enforcement action’ if the bank doesn’t take immediate steps to ‘strengthen the bank’, a statement which apparently rattled the bank’s directors, and should rattle their depositors who have a pulse.
Bank of America’s stock price (BAC), which was once above $50, is now barely above $5 and has lost 58% of its value this year alone.
It is unclear when regulators will decide whether more severe measures are necessary.
Since mid-2009, Bank of America has appointed eight new directors and made a number of internal changes ranging from how it classified credit to risk and liquidity-management controls.
Regulators are shortening the leash on the nation’s biggest banks as they try to prevent future blowups. Bank of America shares have tumbled 58% this year—the biggest decline among major U.S. banks.
Source: The Wall Street Journal>
Question: Would you stay invested in a company that has lost 90% of it’s market value? Do you still have your checking and savings there?
It’s not just Bank of America… the FED is set to test six big U.S. banks for ‘Euro stress’. Bank of America, Citigroup, Goldman Sachs, JPMorgan Chase, Morgan Stanley and Wells Fargo.
The U.S. Federal Reserve plans to stress test six large U.S. banks against a hypothetical market shock, including a deterioration of the European debt crisis
“They are clearly worried about the issue of Europe,”
The Fed said its global market shock test for those banks will be generally based on price and rate movements that occurred in the second half of 2008, and also on “potential sharp market price movements in European sovereign and financial sectors.”
It doesn’t end there… according to a Bloomberg report, the Federal Reserve just told the 31 largest U.S. banks to test their loan portfolios and trading books against a deep recession and a European market shock to ensure they have enough capital to withstand losses.
Do you get the feeling that the FED is getting nervous? (Rightfully so, i’d say…)
Where’s your money at? Perhaps it’s time to check the strength of your bank, or switch to a credit union.
Here is a website where you can check your bank or credit union rating. Bankrate.com
Most everything is interconnected these days. If Europe implodes (say, even if just Italy or Spain implodes), so will a very many financial institutions, like dominoes. These entities are so leveraged, that if even a fraction of their loans are called in / default, they will go belly up. So, check your bank rating to see if they have sufficiently strong assets to survive economic Armageddon, before it is too late for you…
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