viewfromnyc

Regional Banks: Too Small to NOT Fail

This article is spot on. The facts are in the latest 10-Qs of the smaller regional banks and thrifts. The market has confirmed the facts by valuing some of the entities at less than book value and the options market has near term probabilities of failure for some smaller banks at 20%. While it may have been leverage that decimated the investment banks, it is going to be the bad real estate loans that are destroy this segment. The proposed legislation that will allow the FHA to buy mortgages after they are written down will only help the more conservative underwriters. The government is probably not going to step in and save a bunch of $50 million to $500 million market cap sized banks, and without any real franchise value, PE and other banks aren't going to be buyers either.