Warning: Mega-banks Could Fail Despite Federal BailoutsSubmitted by northstar on Wed, 01/28/2009 - 01:49
Martin Weiss writes: The time has come to issue one of my sternest warnings to date: Bank of America and Citigroup could fail despite the most radical government rescues of all time.
Right now, after recent close calls with instant death, these two megabanks are on life support, receiving massive transfusions of government capital. But they're still hemorrhaging, and no one in Washington has found a cure.
Already, they have received capital injections of $90 billion ($45 billion each).
Already, this bailout is larger than the total combined capital of PNC Bank, Suntrust Bank and State Street Bank — all among America's ten largest.
Yet, ironically, that $90 billion is still a drop in the ocean compared to their massive exposure to risky assets.
The shocking facts revealed in the banks' own balance sheets and in the OCC's Quarterly Report demonstrate the enormity of problem: -see chart-
Fact #1. Too big to save. Bank of America Corp. and Citigroup, Inc. have combined assets of $3.9 trillion, or 43 times the size of the Treasury bailout funds they've received to date.
Fact #2. Bigger losses ahead. Even before any further declines in the economy, an unusually large portion of their assets are already in grave jeopardy — commercial real estate loans going sour, credit cards loans tanking, auto loans sinking, and residential mortgages turning to dust. Now, as the economy continues to tumble, avoiding much larger losses will be almost impossible.
Fact #3. Big derivatives players. Bank of America and Citigroup are the nation's second and third largest high-rollers in the derivatives market, with a combined total of $78 trillion in these bets outstanding. That's over ten times the derivatives that Lehman Brothers had on its books when it failed last year.
Read more and Facts at: http://www.marketoracle.co.uk/Article8504.html