Analyst calls situation bleak for Wachovia as jitters about the banking system continue
Analyst warns on Wachovia amid more bank worries
Tuesday July 15, 9:59 am ET
Analyst calls situation bleak for Wachovia as jitters about the banking system continue
NEW YORK (AP) -- The situation is increasingly bleak for Wachovia Corp. and the bank's mortgage portfolio will continue to lose value, "seriously jeopardizing" the company's ability to generate earnings, an influential analyst warned on Tuesday.
The latest note of caution came as the government moved to reassure people their money is safe in the nation's banks. Yet fears about the system persisted and financial shares were broadly lower Tuesday, signaling another tough day for the stock market.
Federal Reserve Chairman Ben Bernanke is scheduled to brief Congress Tuesday on the economy, which has been walloped by high energy prices and fallout from the housing slump and credit crunch. The testimony also comes amid a backdrop of rising oil prices and a slumping dollar, and as stock markets overseas tumble amid worries about the U.S. financial system.
Bernanke will also specifically address a rescue plan crafted over the weekend for mortgage financiers Fannie Mae and Freddie Mac, which hold or guarantee more than $5 trillion in mortgages -- almost half of the nation's total.
On Monday, shares of U.S. banks and financial companies swooned on concern that the government plan to shore up Fannie and Freddie would not be enough to keep them from failing, which could undermine the U.S. and global financial system.
National City Corp. shares fell nearly 15 percent on rumors of financial trouble, even though it said it was experiencing no unusual activity. Washington Mutual Inc.'s shares fell 35 percent amid worries about whether it had enough cash to handle the mortgage market downturn. WaMu said that it did.
Depositors lined up outside IndyMac Bank branches on Monday to pull their cash out after the savings and loan's assets were seized by the Federal Deposit Insurance Corporation on Friday. It was the largest bank failure since the collapse of Continental Illinois in 1984. It is estimated it could cost the FDIC between $4 billion and $8 billion out of the agency's $53 billion insurance fund.
In Asia and Europe, lack of confidence in U.S. regulators' ability to contain the problems sent shares tumbling.
Oppenheimer Co. analyst Meredith Whitney added to the concerns in downgrading Wachovia, citing a "very real scenario" of declining assets and rising losses. Whitney is closely followed after a series of sharp calls during the credit crisis about troubles at other banks, including Citigroup.
Wachovia shares fell more than 14 percent in early trading, while National City shares also dropped 14 percent. Shares of Fannie Mae and Freddie Mac both fell more than 15 percent, and Citigroup and Bank of America both shed 5 percent.
But the government's top bank watchdog went on television to ensure people their deposits were not at risk, despite the brewing crisis.
"Insured deposits are absolutely safe," Sheila Bair, FDIC chairwoman, said in an interview on CBS' "The Early Show." "The banking system as a whole is absolutely safe."
Tuesday July 15, 9:59 am ET
Analyst calls situation bleak for Wachovia as jitters about the banking system continue
NEW YORK (AP) -- The situation is increasingly bleak for Wachovia Corp. and the bank's mortgage portfolio will continue to lose value, "seriously jeopardizing" the company's ability to generate earnings, an influential analyst warned on Tuesday.
The latest note of caution came as the government moved to reassure people their money is safe in the nation's banks. Yet fears about the system persisted and financial shares were broadly lower Tuesday, signaling another tough day for the stock market.
Federal Reserve Chairman Ben Bernanke is scheduled to brief Congress Tuesday on the economy, which has been walloped by high energy prices and fallout from the housing slump and credit crunch. The testimony also comes amid a backdrop of rising oil prices and a slumping dollar, and as stock markets overseas tumble amid worries about the U.S. financial system.
Bernanke will also specifically address a rescue plan crafted over the weekend for mortgage financiers Fannie Mae and Freddie Mac, which hold or guarantee more than $5 trillion in mortgages -- almost half of the nation's total.
On Monday, shares of U.S. banks and financial companies swooned on concern that the government plan to shore up Fannie and Freddie would not be enough to keep them from failing, which could undermine the U.S. and global financial system.
National City Corp. shares fell nearly 15 percent on rumors of financial trouble, even though it said it was experiencing no unusual activity. Washington Mutual Inc.'s shares fell 35 percent amid worries about whether it had enough cash to handle the mortgage market downturn. WaMu said that it did.
Depositors lined up outside IndyMac Bank branches on Monday to pull their cash out after the savings and loan's assets were seized by the Federal Deposit Insurance Corporation on Friday. It was the largest bank failure since the collapse of Continental Illinois in 1984. It is estimated it could cost the FDIC between $4 billion and $8 billion out of the agency's $53 billion insurance fund.
In Asia and Europe, lack of confidence in U.S. regulators' ability to contain the problems sent shares tumbling.
Oppenheimer Co. analyst Meredith Whitney added to the concerns in downgrading Wachovia, citing a "very real scenario" of declining assets and rising losses. Whitney is closely followed after a series of sharp calls during the credit crisis about troubles at other banks, including Citigroup.
Wachovia shares fell more than 14 percent in early trading, while National City shares also dropped 14 percent. Shares of Fannie Mae and Freddie Mac both fell more than 15 percent, and Citigroup and Bank of America both shed 5 percent.
But the government's top bank watchdog went on television to ensure people their deposits were not at risk, despite the brewing crisis.
"Insured deposits are absolutely safe," Sheila Bair, FDIC chairwoman, said in an interview on CBS' "The Early Show." "The banking system as a whole is absolutely safe."
posted by The Builder at
9:31 AM
2 Comments:
Wachovia is actually a very diversified, and well-capitalized company. It's outlook is not "bleek".
Who is this "influential analyst" the AP cites? It's utterly amazing how an anonymous journalist can cite anything at all said by anyone at anytime - without substantiation, or facts, or credentials - and papers print it, pundits blog it, and the market reacts to it!
Be careful. This is real life, not a game.
Are you a Wachovia employee? There have been several visitors from wachovia.com today.
I agree, the AP writing an article on an unnamed source is potentially damaging when considering the averse effects of being wrong.
However, the current situation is not the AP's fault or anyone except the banks and the FED.
You are right, this is real life and a lot of real lives are being unnecessarily hurt by banks like Wachovia and the economic policies they endorse like economic integration, fractional reserve banking and military Keynesianism.
Do the right thing -- have Wachovia join a consortium to find an alternative to the Federal Reserve System and develop an intrinsic backed US note that still allows for economic growth.
Do a innovative thing like promote a North American Monetary Union based on commodity currencies. It's the only solution. Better look up 'creative destruction' because the entire establishment banking and foreign policy apparatus is falling apart.
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