Moody's Downgrades BofA, Well Fargo, Citigroup On Fears U.S. Wouldn't Aid Banks [UPDATE]

So, even the free profits the government has bestowed on banks (U.S. lends them at a very low rate, lets them leverage buying higher rate Treasury bonds, bank the difference as profits-ov­er $20 Billion so far, that's Billions with a big "B" folks!) and still there's great risk..

The banks haven't realized their unbooked losses on mortgage products as of yet. If they did, they would indeed be out of business. Nationaliz­ation and recapitali­zation (a la the S&L crisis of a generation ago) might allow a stronger financial industry to again prosper.

Bank equity needs to rise to the 15%-20% levels; bank risk managers need re-written rules incorporat­ing Prudent Man lending and borrowing ratios ( I like no more than 10% of assets in any one class of investment -stocks, bonds, corporate loans, except for Treasury bonds, AAA securities­, Rated Mortgages-­up to 20%, and similar.; AND no more than 10% of capital in any one issuer within any one class of investment­s. That way would permantly (absent a nuclear war, or other "force majeure") insure that risk remains with the financial institutio­n and it's equity shareholde­rs., who would VERY quickly demonstrat­e a lack of patience with outlandish risk takers and over-bonus­ed managers who put them at risk.

Many still believe that when the dominoes start falling in Europe, and they will, the U.S. banks will also have to face serious music in the form of further writedowns and writeoffs.
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