Time for Banks to Raise Equity Capital. Go-Go-Go…Quickly!

Posted on July 22nd, 2008 in Daily Mortgage/Housing News - The Real Story, Mr Mortgage's Personal Opinions/Research

Literally overnight, everyone is bullish on banks despite their underlying problems not getting any better. Only a week ago, the stock prices of banks that have yet to raise capital or are in desperate need of capital were at levels that were prohibitive to do so.

In a single week, banks and investment banks such as Wells Fargo, PNC, Bank of America, Wachovia, SunTrust, US Bank, Chase, CITI, First Horizon, National City, Downey Savings, First Federal, Lehman, Merrill, Morgan and many more have seen their share prices shoot up 25 to 100%.  Wells and PNC are back near their 2008 highs!

If I were a bank CEO knowing that my mortgage loan default and REO numbers are growing, housing is continuing to weaken, the economy is weakening and the credit and stock markets are on shaky ground, I would be throwing out an ‘equity’ capital raise this very moment while my stock price is surging. 

Hank Paulson said just Monday on bubblevision (loosely quoted) ‘I keep saying the same things to the banks as I have for months and that is to sell ‘assets,’ de-lever and raise capital’.

Look at WaMu today. In the last day, it has basically given up everything it made in the past week, and the stock price is now collapsing once again. I thought stopping naked shorting would solve this problem. Or maybe it is just leaving these companies to trade on their own fundamentals. WaMu is a bad example because they owe TPG a fortune if they raise capital under $8.75 per share. But the bank is also a good example because this could happen to the other bank stocks soon. Who knows?

Come on banks, hop to it!  Why not do it now and start being part of the solution?  Many top market forecasters, including Bill King, think this is simply “an SEC-induced short squeeze and dead-cat bounce in a bear market, as back offices scramble to rectify the endemic problem of ‘fails to deliver’ that has persisted for years.  Once compliance occurs, it’s ‘goodnight, Gracie.'”

If true, there is no better time than the present to issue shares.  Why gamble on an unknown future with your stock price and share holders money?  It is easier to shore up your balance sheets now by issuing equity when your stock prices are way up, than spending all quarter figuring out how to put together a ‘good’ earnings report.  -Best, Mr Mortgage  <>

OTHER MR MORTGAGE RELATED STORIES

After Massive Financials-Led Rally, WAMU Drops a Bomb

Mr Mortgage on Fannie/Freddie Massively Underestimated Risks

Mr Mortgage: June CA Foreclosure Report – Conditions Worsening

IndyMac: One More Lie for the Road! Consumers and Brokers Beware

The Pay Option Implosion – Subprime’s Big Brother

Look Out! Here Comes the Alt-A Implosion

Mr Mortgage onMortgage Modifications Part 2 – BEING FORWARD THINKING

12 Responses to “Time for Banks to Raise Equity Capital. Go-Go-Go…Quickly!”

  1. IF and I mean IF that statement is true coming from Mr. P. then he is simply talking out of both sides of his mouth. Which, while not surprising in the least, is certainly cause for alarm, don’t you think?

    Would not ALL of his efforts be put toward assisting Freddie and Fannie in raising capital instead of raising taxes then? Yes, you heard that correct! Taxes will have to be raised in order to “Bail Out” these GSE’s.

    Bottom of the third inning and struggling to get through it. A long… long game ahead of us…

  2. Temporarily not being able to short a lot of the financials has helped this rally. The flip side is that there will be fewer buyers when the secondaries come. True buyers will only adsorb the new shares at quiet a discount I imagine, since many of them have not been able to partake in this lighting quick rally.

  3. Maybe it’s just the PPT that’s bullish on the banks? Maybe it’s just day traders or covering shorts? Maybe there are more Greater Fools out there than we think? The banks will go ‘belly-up’ unless……..they are too big to fail. Hanky-panky will have to go back to Congress soon and ask for more blank checks to bail out banks that are ‘vital’ to our ‘fundamentally strong economy’. Congress will have to approve those bail-outs – or they will be blamed for the ‘Financial Armageddon’, come election-time!

    Those diabolical Zionist planners are NO DUMMIES!

  4. They are just delaying the inevitable. Who in their right mind would buy into any of these companies announcing losses this disastrous? Better than expected my ass. I believe the PPT is turned on high right now delaying a complete collapse till just before or just after the election. Just like oil mysteriously dropping twenty dollars. In 4 days did supply suddenly increase dramatically? Did demand across the globe flatten out? Are all the “speculators” on vacation? War with Iran…we were just kidding. Every stitch of what we see or hear on television is complete propaganda, in the grandest Orwellian style.

  5. […] Time for Banks to Raise Capital – Go-Go-Go…Quickly! […]

  6. This rally is ridiculous. I think I live in Bizarro World. On what planet can Regions, Wachovia, and WaMu report numbers like they did and end up over 10% each at the end of the day? WTF is going on with people that run money out there? I starting shorting these guys again into the close but in rather small increments as I think we may climb on the open again tomorrow. ZION had a 5pt range today! Just crazy. This will end horribly IMO.

  7. I think PPT will buy as MANY shares outstanding as they can for all US Banks and top it up to all time highs with taxpayer’s money and then, they are going to BUY all the home builder’s and consumer discretionary shares and any sector they found it was going downwards also with taxpayer’s money. In the end, they will dump all these shares into setting up some kind of ETF from the government (similar to the tracker fund in Hong Kong during the asian currency crisis) and let investors takes the pain from that onwards…

  8. Operation “PUMP AND DUMP”.

  9. […] price now. Who will buy Wu Mu now, would you? The reality is that the best the bank can hope for is a continued stock rally and the possibility of selling off some  more of it’s assets. Furthermore that chunk added […]

  10. We are witnessing the DELIBERATE DESTRUCTION of America and the GFS (Global Financial System) by Zionists. No matter what (horrendous) scenario you can imagine, they all have the same ending. The seeds of destruction were planted long ago. Karl D, over at Market Ticker, is beside himself with anger and frustration at the upcoming (today) Congressional approval of the Death-Knell Bill. He’s right about the implications for America and Americans but he can’t SEE! who is responsible (Israeli/American Zionists, led by Greenspan & Bernanke and a few ‘Auslege’ Goy – Bush, Cheney, Paulson, etc.).

    As I said before (MANY times) – there is NO EXIT from the approaching ‘Financial Armageddon’. It has been meticulously PLANNED, including the timing (close to the election).

    “Something is in the air – the Revolution’s here!”

    SEE! the solution of The Puzzle in its entirety. (click on my name, above).

    PS Note that Bush has given the Housing Death-Knell Bill the ‘green light’ after whining about vetoing it for several weeks – for show!

  11. Time to pay the piper. I really love this notion of blank check to Paulson, to pay his buddies mobsters. It smells a lot like the Weimar Republic or the Godfather. Hey Ethernal it’s far bigger than that. You can lump in the Russian mafia, the China mafia, the Saudi mafia, and all the stinking globalist bankers and scumbags. US taxpayers like the electors are brain dead. They don’t get it. Yes they will be getting the bill in after the election. And it won’t change a hoot. McCocaine or Obama Ben Laden, It won’t change anything. Step right up to get screwed. Now I just wondered. Will there be a way to keep track of the money printing and where all the monetize debt ?

  12. Wondered how that fascist Paulson will manage to pump and dump also Ford and General Motors ?Have you seen the quarterly earnings of Ford today ? -65 cents instead of -25 cents. Many national-socialist bailouts coming real soon. What’s the real value of Ford ? Like the banks another piece of scrap that will be bailed oup by the taxpayer slave. “Too big to fail” everywhere.

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