The banking industry has a lot of the market losses they have experienced tied directly to financial stocks. The first trading day after Labor Day reflected investments in the American stock market decreasing and this trend has continued throughout the month of September.
Bank of America which happens to be our nation’s largest and most vulnerable bank continues to experience falling bank shares. Other leaders in the banking industry don’t appear to be faring better than Bank of America with tier banks shares and stock prices.
Banks have seen a damper on their outlook since the bailout. European debt issues are worsening along with the United States lawsuits filed against 17 various banks for nearly $200 billion worth of mortgage bonds that happen to be toxic. Both of these are contributing to the last quarter of 2011 having a dismal outlook for almost all financial institutions, especially banks.
The lawsuit filed by the Federal Housing Finance Agency is weakening the bank shares of many of the most stable banks. Banks named in the lawsuit that don’t have a lot of stability are really going to feel the pinch of the lawsuit along with the banking concerns that are coming out of Europe. Losses from the lawsuits are estimated to be as high as $121 billion. Of the $121 billion in losses the top four banks in America will absorb 60% of the lawsuit. The top four banks affected by the lawsuit will be Citi, Wells Fargo, JP Morgan and BofA.
Nearly 50 state attorney generals are negotiating with banks over inappropriate or inadequate foreclosure practices which include but are not limited to robo-signing. This investigation and negotiation may lead to a $20 billion dollar payment by the nations mortgage lenders. The major mortgage lenders involved in the issue also happen to be the same banks listed in the FHFAs lawsuit.
The lawsuit and issues to be resolved with the attorney generals for the nation’s top banks will definitely affect the financial recovery of America. Banks will certainly continue their cautious lending approach in the marketplace. Although banks are struggling to grow their revenues, they are certainly concerned about reps and warrant claims.
Rochdale Securities Dick Bove has pointed out he feels the banking predicament will continue to get worse. Bove specified the lawsuit by the federal government is revealing the government would like to see the banking industry restructured to allow smaller banks to take a larger market share of the industry and for larger banks to have a smaller share of the market.
The federal government’s goals with the banking industry have been made clear. They would like to pass several laws to restructure banking along with instituting forced changes in the entire banking process and file lawsuits against banks whenever possible in order to see these new banking goals achieved.
Bank analysts believe the FHFA (Federal Housing Finance Agency) lawsuit will achieve the goal of erasing doubt surrounding what banks will owe for their mortgage mishaps.