Rhunzzz

Time to Buy Bank Stocks

Well the problem is this - the toxic assets have to go, it's that simple.

And as long as the Obama administration does anything that does not involve overpaying for toxic assets (which would be political suicide), shareholder equity in the banks holding those assets will be hurt.

Let's run through the options:

1. Nationalization - 'nuff said.

2. Stealth nationalization - the Treasury takes a stake in the banks in return for injecting new capital, clearing out the toxic assets, guarantees, etc. This would dilute shareholders.

3. Delayed nationalization - the Treasury gets warrants or preferred stock convertible to common stock, in return for capital injections, clearing out the toxic waste, guarantees, etc. This would still dilute shareholders, albeit over a longer period. It would still hurt shareholders unless the share price is rising.