Erin Burnett called the situation with the banks "grim" this morning. I continue to argue that the banking situation will continue to worsen. Who knows how many banks are in trouble. Will the government bail them all out? Can it? Who's going to bail out the government? Will it be too late to do something when we do learn the answers?
Wachovia Corp., the U.S. bank that hired Treasury Undersecretary Robert Steel as chief executive officer two weeks ago, reported a record quarterly loss of $8.9 billion and slashed the dividend. The stock fell as much as 12 percent in early New York trading.
The second-quarter loss of $4.20 a share compared with net income of $2.3 billion, or $1.23, a year earlier, the Charlotte, North Carolina-based company said today in a statement. The loss included a $6.1 billion charge tied to declining asset values.
The writedown and second dividend reduction in three months reflect Steel's response to setbacks including the Golden West Financial Corp. acquisition in 2006, which cost former CEO Kennedy Thompson his job after eight years. Wachovia has dropped more than 75 percent in New York Stock Exchange composite trading since it spent $24 billion two years ago to buy Golden West just as house prices were peaking.
It's gotten so bad that even when banks report losses Wall St. takes that as a positive news:
Bank of America Corp. has become the latest in a string of big banks whose second-quarter earnings, while hurting from the impact of the credit crisis, still managed to beat Wall Street expectations.
The nation's second-largest bank by assets said yesterday that its profit fell 41 percent as losses in its struggling mortgage operations were offset by business in other parts of the company. But it easily beat Wall Street estimates, and its stock rose $1.07, or 3.9 percent, to $28.56 in afternoon trading.
Four of the nation's five biggest banks have now reported better-than-estimated results. JPMorgan Chase & Co. and Wells Fargo & Co. reported smaller-than-expected profit declines, and Citigroup Inc. had a milder-than-expected $2.5 billion loss.
Maybe we should listen to Henry Paulson. Let's put our trust in this administration. They will do the right thing. Haven't done a great job up till this point?
Treasury Secretary Henry Paulson said Sunday that the current economic difficulties will take months to pass but added that turmoil in the banking sector is under control.
"This is a tough time," Paulson said in an interview on CBS's Face the Nation. "We're going to be in a period of slow growth for a while."
But he added that recovery would involve a matter of months rather than years.
Paulson also voiced confidence on government's ability to deal with the recent string of bank failures.
"Our regulators are on top of it. This is a very manageable situation," he said.
He said 2008 has seen only five banks fail, compared with about 250 failures seen in a single year during the height of the savings-and-loan crisis of the late 1980s and early 1990s.
Speaking later on CNN's Late Edition, he added that "99% of the banks with 99% of the assets" were in good shape in terms of capitalization.
"Stability in the capital markets, that's our No. 1 thing," he said
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