"Get Real With Write Down"
The Federal Reserve currently has a list of 90 banks on watch for failure and it is imperative that the Federal Government begins to get ready for the probability of a wave of failed banks.
All you have to do is look at the numbers: As of Monday, Wachovia's stock had fallen over the past year by 81 percent, Citigroup's by 71 percent and SunTrust's by 69 percent. And the stock of Washington Mutual, the nation's largest savings and loan, had tumbled 92 percent.
Oppenheimer & Co.'s analyst, Meredith Whitneythe analyst joins Bloomberg to discuss her outlook for the banks. Whitney suggests that the decline in house prices must lead to more write-downs that will be equally if not more significant to the ones seen to date.
She quoted:
> "That the US Banking industry's failure to anticipate the steep fall of home prices could lead to a material and protracted write-down and capital pressure scenario for the banks well into 2009."
> She added "bank stocks will keep falling until asset prices `get real' and "Mortgage assets are still priced too high on U.S. banks' balance sheets"
Originally aired on: 7/16/2008 on Bloomberg. Click here to view the discussion.
Running Time: 15 minutes 46 seconds
Until confidence in the secondary market returns, and investors can trust the true value of the mortgage assets used in securitization, the housing market will suffer for lack of liquidity. Until liquidity is restored, home buyers will have difficulties in getting bank financing thereby prolonging the recovery of the US housing market.
