8 Top U.S. Banks Just Acknowledged They're Insolvent
by bobswern, Wed Mar 04, 2009 at 11:27:41 PM EST
Based upon the fair-market value of their securitized loan assets in conjunction with annual federal accounting requirements, Bloomberg's Jonathan Weil informs us this evening that eight of America's top 24 banks are insolvent in: Wells Fargo, BofA Loan Values Are a Scary Sight.
Yes, Wells Fargo, Bank of America, SunTrust, KeyCorp, Fifth Third Bancorp, Huntington Bancshares Inc., Marshall & Ilsley Corp. and Regions Financial Corp have formally acknowledged that--for all intents and purposes--they're currently insolvent.
Perhaps never before have so many banks' balance sheets been so patently full of hot air. Bank of America Corp. last week disclosed that its loans at the end of 2008 were worth $44.6 billion less than what its balance sheet said. Wells Fargo & Co. said its loans were worth $14.2 billion less than their book value. The spread at SunTrust Banks Inc. was $13.7 billion.
Keep in mind: These are the banks' own numbers. If there's any bias in them, it's bound to be on the side of optimism.
As Weil continues to explain it, if this is what the banks are now admitting, reality's probably much worse than this. This is due to the fact that these banks are also telling us that these realities would be further "adjusted" by hoped-for, yet-to-be-determined tax writedowns, which are currently being booked as assets even though these assets are a stretch to categorize them as such. You see, declaring future tax credits means you're saying you'll have equivalent future taxes on future profits of those amounts, too.
If eight of our top banks acknowledging insolvency is just a "recession," how many top banks acknowledging insolvency does it take to equal a depression? (Sounds like a ninth grade algebra question!)
Tags: bank of america, banking, banks, business accounting, business taxes, depression, Fifth Third Bancorp, Huntington Bancshares Inc., KeyCorp, Marshall & Ilsley Corp., Recession, Regions Financial Corp, SunTrust, U.S. banks, Wells Fargo (all tags)