Today was a bad day for financials. So, what else is new, you ask?
WAMU came out with a statement, saying it's "well capitalised". Their stock took a 35% beating today....then rose 10% in extended trading hours after 4pm EST.
National City today said that they maintain one of the highest Tier 1 capital ratios among large banks. (Tier 1, by the way, is basically the cash value of all the company's stock put together) These comments were during the middle of the worst trading day for Nat City ever, with shares dipping down below their June 1984 levels, utlimately losing 15% on the day.
Just 2 months ago, Indymac Bancorp (which has since failed) was "well capitalised".
While the Fed didn't say Fannie Mae and Freddie Mac were 'well capitalised' last week (OFHEO did back in March), they did say they "support them at their current levels". Additionally, Freddie said their capital levels were "strong". Then, a couple days later, into the weekend (so traders couldn't immediately react) the Treasury Secretary Henry Paulson gave these two GSE's an unlimited line of credit to pay their obligations and meet reserve requirements, and sought authorisation from Congree to buy Fannie and Freddie stock, keeping it solvent.
So, the question is, who really believes whom anymore? I'm afraid that all these overstatements of "well capitalised" will affect the same event of the boy who cried wolf. Eventually, a bank will actually be well capitalised, but no one investor will believe them because they will grow accustomed to so much truth-spinning, etc.
What else is new, you ask? Well, who knows, WAMU might actually be well capitalised, but they won't benefit from their comments today. No one is going to believe any financial institution for now.
Those saying otherwise are largely naive, towing the company line and don't have the benefit of being able to think for themselves, or are looking for a sure profit backed by the taxpayer's dime.
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