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P/B vs. P/E: Measuring a Stock's Value

In general I agree with the sentiment of the article, especially when evaluating the market as a whole. However, when looking at an individual situation such as this, you obviously have to determine whether or not they will be an ongoing operating entity. Otherwise, your analysis would have said:

I should buy CFC, WM, BSC, LEH, AIG, WB, FNM, FRE, etc, etc. They have a low P/B!! Whoo hoo!!

In some ways you could approach this from a reverse angle. Note who in the banking sector amongst the fallen have much higher P/B ratios as a sign of a higher chance of remaining an ongoing operating entity which will benefit from the loss of the other cacasses.

Wells Fargo Can Hack Its Writedowns - Can Citi and JPMorgan?

Actually I'm not sure where you're deriving your economic capital in the equation from, so I'd be curious how you're getting an order of magnitude worse in your calculation. JPM has according it's own documents, from memory about $43.3 billion in EC (which is a risk based measure) in comparison to $83 Tier 1 and $120+ Total capital. JPM has an allowance ratio to nonaccruals that is very high in comparison to other companies. They do have a bunch of leveraged loans they can't sell. That's true. But that isn't the paper I'm most concerned about in this environment. If you can come up with a real calculation that brings up the EC calculation to $300 billion+, please share how you're deriving it too. Thanks.