I'm watching this regional bank rally with a lot of head scratching. As if they are not exposed to commercial loans, mortgages, and general economic malaise? They are impervious to the forces affecting the rest of the system? Wilbur Ross says possibly 1000 banks to go. I don't have a number in my head, but it is a far darker picture than the government is "assuring" us. Remember, they did not even have IndyMac Bank (one of the largest bank failures in history) on their "troubled bank" list, the quarter before it went under. [Aug 26: FDIC Troubled Bank List] They don't have Washington Mutual (WM) which looks destined to be delivered to JPMorgan (JPM) in a "arm twisting" by government on their troubled bank list. So whose to believe anything coming out of these same folks who told us "subprime is contained" in spring 2007. I don't know whether they have been ignorant or deceitful over the past 18 months; and frankly I don't know which scares me more.
Myself, I'm sticking with billionaires and insiders. Still no massive insider buying at these "bargain" prices by banking executives and no signs of Buffet swooping it to take advantage of the "bargains". Sure the stocks can be run up, but the stock market has a mind of its own.
Again, I expect "emergency fund requests" for the FDIC (federal deposit insurance) as the situation devolves.
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In an exclusive interview with CNBC.com, Wilbur Ross, chairman and CEO of WL Ross & Co., says he sees possibly as many as a thousand bank closures in the coming months. And this will create opportunities for investors."I do think a lot of the regional ones will (close), just as they did in the last savings and loan crisis in the 1990s," Ross said.
Ross says he will be looking to pick up smaller distressed institutions. "There will be opportunities, but we will need federal assistance in them, because what we're mainly looking for is stable sources of deposits, not so much the loan portfolio."
Ross feels that there will be too many people willing to provide capital to the large financials, which makes them less of a bargain than smaller banks.
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