ItsJustMe

Regional Bank Failures: The Next Shoe to Drop

Voice of Reason, not many true voices of reason call people dumb and idiotic. And especially not when both Greenspan and Bernanke have stated clearly that there will be numerous bank failures coming.

Bear Stearns was a bank failure. Having Chase take over their accounts doesn't mean it wasn't a failure and yes, there will be more including some of the top 15. The Fed has gotten a LOT of criticism over the fact that BSC likely has negative equity yet BSC's shareholders are walking away with $10 per share (to try and prevent lawsuits) so it's unlikely that shareholders of the next failure will get anything other than condolences.

When you have banks operating at 35 to 1 leverage, all it takes is a couple of percentage points loss on their total assets and they're insolvent. Guess what? Most of the banks that dealt in sub-prime mortgages (like Bear) are experiencing default rates of up to 30% and are now insolvent.

The Fed has ordered them to either raise capital to replace their lost capital or die. Those that can (GS, UBS, Citi) are scrambling to raise capital. Those that can't (NCC, SOV, and many others) are already in the process of dying.

Meredith Whitney has been the true voice of reason. Loaning billions of dollars to people with sub-700 credit scores and no equity at a 35 to 1 leverage ratio was an exercise in gross negligence that is about to bring down a LOT of banks over the next 24 months...