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If the FDIC is poised to split banks to lure buyers, which is the headline from last week's papers, the buyers worth luring are not only the NewAlliances (NYSE: NAL) (Cramer's Take) and the First Niagaras (NASDAQ: FNFG) (Cramer's Take) but also Chinese banks and HSBC (NYSE: HBC) (Cramer's Take) and Barclays (NYSE: BCS) (Cramer's Take), both of which reported great quarters yesterday.
We keep focusing on these private-equity entrees that need to be intrigued to get in. I say to heck with them. That's nonsense. We need deep-pocketed existing banks that want to be bigger in the United States, not more handouts to private-equity firms that then bring them public in our faces and make a ton of money off us. We need ones that know how to run banks and know how to compete against the new colossuses like Bank of America (NYSE: BAC) (Cramer's Take), JPMorgan (NYSE: JPM) (Cramer's Take) and Wells Fargo (NYSE: WFC) (Cramer's Take).
Why not give private-equity firms the edge? Because the existing banks, HSBC and Barclays or the NewAlliances and First Niagaras, will give the taxpayers better deals. The FDIC can say to them, "If you want these banks, you have to take this many bad loans," something that the private-equity companies won't go for at all. The private-equity firms everyone wants in won't move until they are sure they will take the government to the cleaners, and then we will have to read endless stories about how they pantsed the FDIC.
With the Barclays and HSBC quarters in the bag, these companies are ready to take share, especially the latter with its strong existing base. China? Why not? Why shouldn't they move aggressively into this country? It's a great banking environment now that so many players are hobbled and can't make loans or are capital-constrained and frozen. You have to pay your depositors next to nothing and can lend at high rates.
Makes a ton of sense to me. Should make a ton of sense to the FDIC, but Sheila Bair seems to be pulled lately in so many directions, maybe she just doesn't see how important it is to have a plan to deal with the regional banks that are about to go bust because they are so heavily involved in failing local commercial real estate endeavors, the real weakness upcoming, the one that plagues the smaller guys that should be gobbled up, not the bigger firms with the steadier books of business.
Jim Cramer is co-founder and chairman of TheStreet.com. He contributes daily market commentary for TheStreet.com's sites and serves as an adviser to the company's CEO. At the time of publication, Cramer was long Bank of America, JPMorgan and Wells Fargo.
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Reader Comments (Page 1 of 1)
8-04-2009 @ 11:19AM
BHarrison said...
Jim, what are you talking about: ". . . a plan to deal with the regional banks that are about to go bust . . ." Haven't you heard that the recession has bottomed out and that the worst is over . . . that we are now experiencing "recovery".
Yeah, there is STILL a lot more to come; and the public is being swamped with propaganda to keep them apathetic. Where is the ground swell of public opinion and demand for more effective reasonable and prudent regulations and oversight to improve the integrity of both the major corporations and the markets?
The concept that "there should not be ANY corporation that is too big to fail" should be obvius to everyone by now. The big corporations are being kept afloat financialy by the government bailout and TARP monies which is counter to the capitalistic principles that this country was founded on, and that has made the USA the great nation that it was. Due to the "socialized" government bailouts, the investment dollars are not valued as they should be. The corporations don't need to pay competitive interests rates because the government is fiving them all of the money that they need to subsidize their operations.
The government bailouts are killing the investors incentives because of the low rate of RoI. I'll put my money in a safe deposit box before I risk it for a measly 2.3% possible return. Meanwhile the credit card companies are charging 25% to 35% in interests. There is simply too much disparity in the market between the RoI for investors and for the RoI for lenders.
8-04-2009 @ 1:51PM
MikeW said...
Financial reforms are long overdue. And the mega-banks have to be stabilized, they are too interconnected in the financial system we are all dependent on. After they are well, they should be broken up into smaller pieces so this cannot happen again -- found a cool site; Balkingpoints ; incredible satellite view of earth
8-04-2009 @ 8:24PM
jo said...
FEED THEM MORE BULL SHIT!! RIGHT JIMMY
8-06-2009 @ 2:59PM
paul s said...
I don't understand, Jimbo, why you don't want these banks to go bust. Y'all cry "socialism" with one breath, but when someone says "okay, creative destruction" with the next, you say,"oh no, can't do that!". What the hell do you care if BoA goes under. The next bank in line will aspire to take its place. Hedge fund trader is the right description for what you do. You are always trying to "hedge" what you say.