Monday Thoughts – Bank Numbers Are Awful

4.20.09

Amid all the reporting about the big banks being profitable, a number of other reports are popping up as analysts dig deeper in the numbers.  Bank of America had larger profit numbers but the reserves they are taking for expected credit losses are quite large – read HERE.

Credit losses are growing at a “rapid rate” at Citigroup too – read HERE. After the government has given them billions they are still losing money. What is also amusing about Citi is that their CEO came out and said their first 2 months of the year were profitable so I’m not sure how they still showed a loss on an operating basis excluding loan losses?

It’s not going to get much better for the banks either. The April 1 voluntary moratorium on bank foreclosures has passed. One note, in an interesting conversation with a Bay Area (CA) real estate attorney and I asked him a question I was curious about. I said “David, are you starting to see more foreclosures by people who are tired of the federal bailouts and just decided they are going to get a benefit for themselves?” He answered that he sees that rising and he also sees people simply deciding that letting a house go that is worth 50% of the mortgage balance makes sense to them.

Read an interesting post on this topic from Calculated Risk HERE

My conclusion is that banks are in for far worse over the next 3 months – it will likely cause the market to re-correct and the government to pour out our tax dollars again. Exciting! More than likely, this will be long term bullish for precious metals and foreign currencies after all the mess subsides and inflation ignites. And perhaps, we will see one of these big banks will finally fail.

Oh for those of you interested in full disclosure and accountable government, Ron Paul has proposed legislation auditing the Federal Reserve and all of their behind closed doors activities. He currently has 55 cosponsors. Go HERE for a video explanation from Ron Paul.

Chris Grande