Reply #11: Investors question financial sector rebound

[ozymandius]

CHARLOTTE, N.C. - Surprisingly large second-quarter losses at Wachovia Corp. and Washington Mutual Inc. have quickly revived concerns that the financial sector still has a long way to go before it recovers from the year-old credit crisis.

Investors who were growing optimistic after a string of upbeat bank results in recent days were jolted Tuesday when Wachovia, the nation's fourth-largest bank, racked up an $8.86 billion loss because of charges and reserves for bad mortgage loans. The Charlotte-based bank also cut its dividend for the second time this year and eliminated 10,750 positions.

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Wachovia's results, coming before trading began on Wall Street, initially sent financial and other stocks falling. The stock market revived as the price of oil skidded again, and so Wachovia's stock rose 27 percent — but with WaMu's results released after the close underscoring the problems in the financial sector, selling could resume when the market opens on Wednesday.

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Global banks and brokerages already have written down some $300 billion of mortgage-backed securities and other risky investments since the crisis began last year and there are fears that more write-downs are ahead as more mortgages fail. Questions remain about which companies will have to raise additional capital going forward, and just how much will be needed.

http://news.yahoo.com/s/ap/20080722/ap_on_bi_ge/earns_banks

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Two things:

(1) If I held a stock that was in any way exposed to Wachovia and Washington Mutual - that stock would be liquidated after yesterday's sucker rally. The more distance I can put between myself and crazy, the better.

(2) Look at these numbers. $309 million in mortgage losses for Regions Financial! More losses related to mortgages are springing up like mushrooms. How much of this is underwritten at Fannie and Freddie? It leads me to conclude that $25 billion requested by Paulson is a boondoggle. That $25 billion request represents a lie of omission.