"Nagging worries" about the banks

That's the word Jack Healy uses to describe the 4.3% sell off in the S&P today (S. & P. Down More Than 4% as Financial Fears Return)

Those concerns were fueled by a few things:

1. The realization that BoA's 'earnings' were mostly due to accounting changes and one-time events, neither of which is sustainable
2. The Goldman accounting gimmickry from last week which was so obvious to all really sunk in over the weekend. Trust in Goldman is shaken, even on Wall St, and folks wonder why the gimmick was buried on page 7 of their earnings report
3. The Obama plan floated in the Times today to convert existing loans to banks to common stock is really just shuffling deck chairs, and does absolutely nothing about underlying insolvencies
4. Ken Lewis being frank for the first time in a while in announcing that credit conditions will get significantly worse
5. The realization that the consumer is really in bad shape, which has been obvious, but which has been overlooked. Housing is not bottoming, retail is hideous, employment will continue to weaken, home equity is gone, savings have been stripped, etc etc....

Thing is, these 'nagging' worries will continue to nag until some form of the inevitable and overdue nationalization takes place, alas.

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The only things holding this back are 1. fear of political repercussions (Socialist!) and 2. hope that the economy is improving, and banks will heal as consumers do. But consumers aren't healing, and once the next round of badness blows in in July, august, September, the failure to have taken dramatic action will appear to have been the bigger political (and economic) miscalculation...

Reminds me of kids' soccer...

...when everyone furiously chases the same ball:

Bank Stocks Leap, Dow Surges 3.1%
The Dow industrials jumped 246 points and the S&P 500 rose 3.8% as bank stocks roared higher on Wells Fargo's pre-announcement.

Holy moly. On Monday we had Mayo bumming everyone out, and today we have Wells making everyone giddy and all tingly. Group-think at its finest. This is what got us into this mess in the first place, for crying out loud. Banks are only making 'profits' cuz the Feds are giving them money left and right (see those Agency purchases, eg) and cuz they're screwing the very taxpayers whose money they're taking (see previous post). Neither 'profit' center is sustainable

Again, shades of Spring 2008 I'm afraid.....

More stuff banks have no idea about

To the now-well-known list of misdeeds and stupidity of bankers (such as CDSs squared, etc ad nauseum), add this little gem:

Banks unknowingly aided smuggling

Just this time it's not toxic. Merely nuclear

NEW YORK, April 7 (UPI) -- A Chinese national allegedly used U.S. banks to fund the smuggling of banned nuclear materials to Iran, prosecutors say.

To paraphrase Brad DeLong: Why oh why cannot we have a better banking system?