Banks Led Us Down In 2008, And Up In 2009. What Are They Telling Us Now?

Financial stocks were the worst performing sector on Monday, and it’s no wonder. I took the weekend to look a bit into the Bank of America’s results from end of last week.  The headlines were pretty blanket – Bank of America Corp.’s fourth-quarter loss widened as charges and write-downs weighed heavily and revenue dropped.

The $1.2 billion dollar loss B of A reported is already bad, considering they were supposed to have turned things around with the government’s help. But I got nostalgic for fall of 2008 when I read that that loss was driven by a write-down of $2 billion related to the mortgage business, and saw that the bank’s mortgage unit reported a $5 billion loss in 4Q.

Home Prices

Photo: Hidden Levers

This is not exactly déjà vu I care for. These too-big-to-fail banks should have been made a non-issue then, because if housing prices continue to fall back to historic norms, then the TBTF banks just become permanent wards of the state.

Long Term Norms

Photo: Hidden Levers

Written by Raj Udeshi for HiddenLevers.


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