Big Al45

Lehman Brothers Take-over: Implications for Financials

The so called "peer group" does not provide a meaningful comparison . Lehman has very little in common with monoline insurers, Business Development Companies, and regional banks that don't have significant off balance sheet exposure. Their asset mix (and risk exposure) is considerably different than that of investment banks like Lehman.

The comparators should be limited to other investment banks and the large money center banks (such as BAC, RY, DB, TD, UBS.)

10 Financial Entities On the Brink

Cesar, I agree in principal with your comments, but why would anyone want to short VNBC or DSL?

The potential reward from shorting stocks that are trading under $3 a share is much less than the potential risk. Some idiot (like Ken Thompson or Ken Lewis) could decide to acquire them to expand their "footprint in the rich California market.?"

10 Financial Entities On the Brink

For an independent opinion on the viability of a particular bank, check out the bank ratings at bankrate.com/brm/safes... Any bank that receives one star (including WM, BKUNA, DSL) from bankrate is probably going to fail. Any bank that receives two stars (Corus, Wachovia) is at risk of failure. Any bank that receives three or more stars (Regions) does not have an immediate risk of failure.

One word of caution. To use this site you have to know the banks legal structure. Most publically traded banks are bank (or thrift) holding companies that own multiple subsidiary banks. Bankrate evaluates each subsidiary bank separately. A holding company can transfer all of its garbage assets to the holding company level and make the subsidiary banks' financial statements look clean.

Financials and Housing: The Outlook Remains Ugly

This writer of this article seems to forget that all real estate is local. His conclusions regarding Alt A defaults is probably on point for banks that have a high exposure to mortgage loans made in Southern and Central California, Nevada, Florida, Michigan, Ohio, and the Atlanta metroplex.

But, there are a lot of other areas in the US where housing prices did not rise much during the housing bubble and prices in those areas probably will not fall more than 15% peak to trough. As long as the government bails out Fannie and Freddie (which seems certain), banks that don't have significant exposure to California, Florida, etc. should return to profitability by the end of 2009.

For the record, I do not own any bank stocks, and expect the market to retest and probably exceed the July lows. However, the level of pessimism in this article is excessive.