It was a tough day for bank stocks today, and tomorrow Capital One Financial Corp. (COF) will get its chance to impress Wall Street when it reports its fourth quarter results.

The market was disappointed today by weak earnings report from Goldman Sachs and by news of job cuts coming from American Express.

Shares of financial giant American Express (AXP) are trading lower in after hours trading despite a stronger than expected earnings report for its third quarter.

Going into this afternoon's earnings report, analysts had been expecting to see American Express announce earnings of $0.86 per share, while actual earnings came in above estimates at $0.90 per share.

This past Friday, which happened to be an options-expiration session, was not a good day for the markets. Among the casualties was Bank of America (BAC). The stock lost over 9% of its value, closing down $1.41 to $13.98. The volume was very high.

Over the past twelve months, the shares have been trading in a narrow range. And they've pulled back from the 52-week high of $19.86 in significant fashion. Back in April, I was cautious on Bank of America. Should I change my mind now? After all, you want to buy when other investors are selling, correct?

Looks like UBS (UBS) isn't going to hand over files on its American clients to U.S. tax authorities.

Nationalist and left-wing lawmakers blocked a treaty with the U.S. that would have allowed UBS to hand over said files. This "treaty" was reached last August between the Swiss government and Washington in order to put to rest a disagreement about UBS's supposed role in tax evasion. The boondoggle was that the Social Democrats wanted a commitment from the government to tax bankers' bonuses and the People's Party wanted a vote against the tax before dealing with the U.S. tax treaty.

Financial giant Legg Mason (LM) reported its fiscal fourth quarter results this afternoon, and the company was able to beat out analyst estimates with a reported $0.39 per share, or $63.6 million for the three months ended March 31.

Going into this afternoon's earnings report, analysts were expecting to see Legg Mason report earnings of $0.35 per share. During the same period last year the company had a loss of $2.29, but since then has been able to post 4 straight quarterly profits.

Although Goldman Sachs (GS) was beaten down recently on news of a civil fraud investigation by the SEC, don't count this Wall Street giant out. The fact is that the bad press has driven down shares to bargain levels, and long-term investors could make the buy of a lifetime snatching up GS shares at current valuations.

Consider that Goldman is now trading at 1.3 times book with its current price of around $157. GS should trade at 1.6 times book -- putting shares somewhere in the $210 range. Despite the fact that Goldman's troubles have resulted in numerous stock downgrades across the financial sector, that's a 34% return for anyone with the guts to buy in right now!

"The effect of this capital assessment will be to help replace uncertainty with transparency. ... We chose a strategy to lift the fog of uncertainty over bank balance sheets and to help ensure that the major banks, individually and collectively, had the capital to continue lending even in a worse-than-expected recession." -- Treasury Secretary Timothy Geithner, May 2009

These tests did NOT bring transparency to the banking sector. They were practically designed to prove the banks were fine, and simply ignored off-balance-sheet and other dodgy assets. It was as if they were saying, "We will do whatever it takes (even lie) to make sure the big banks do not fail since Congress won't give us more money to fix them."

The market staged an impressive rally this year, but it was predicated on some very big lies, as opposed to solid fundamentals or the beginnings of a real recovery in the U.S. economy.

The biggest lie investors were fed? That, statistically, the recession "officially" ended in Q3 when we saw 3.5% GDP growth. Sure the Bureau of Economic Analysis revised their number substantially in November, saying we only saw 2.8% growth, but this was growth nonetheless ... according to the statistics.

For the first half of 2010, almost two thirds of money managers are bullish, according to Barron's. In fact, 54% are bullish, and 5% are "very bullish." Responses suggest that the Dow Jones Industrial Average is expected to gain another 5% by the end of the year.

According to Barron's, "Today's bullish investors see the major stock indexes making steady progress through next June, amid signs the U.S. economy is on the mend after a searing recession."

This morning, ING (NYSE: ING) announced that its quarterly profit dropped as a result of falling property prices and bad-debt charges. The banking group's profit fell to $100.2 million in the latest quarter. Excluding charges, the company's profit dropped to 229 million euros, which was far short of the expected profit of 388 million euros.

The value of the company's real-estate holdings slipped 584 million euros due to falling prices across the globe. ING also incurred 825 million euros of provisions in order to cover customers who may not have been able to repay their loans. These provisions were higher than the 234 million euros set aside during the same quarter a year ago. The real estate charges were far greater than expected, while the loan-impairment charges met expectations.

Late yesterday, MetLife (NYSE: MET) announced a second-quarter net loss of $1.74 per share, compared to earnings of $1.26 per share a year ago. The company blamed the loss on derivative losses of $1.8 billion, $1 billion of which was related to an increase in the company's own debt in the second quarter. Excluding charges, MET earned 88 cents per share for the quarter, topping the consensus estimate by 20 cents. The insurer's premiums, fees, and other revenue increased 4% to $8.38 billion thanks to a record amount of money spent in variable annuity products.

Variable annuities can be described as a contract between the purchaser and the insurance company. The insurer agrees to make payments to the purchaser either immediately or at a future date. Investment options for variable annuities are usually a mutual fund that invests in stocks, bonds, money market instruments, or a combination of the three.

American Express Company (NYSE: AXP), a company that competes with Visa Inc. (NYSE: V), MasterCard Incorporated (NYSE: MA), and Discover Financial Services (NYSE: DFS), issued Q2 results earlier in the week. Earnings from continuing operations dropped very steeply to 9 cents per share. How steeply? Well, the per-share profit lost 84% of its value this time around. However, it might make you feel a little better to know that 18 cents can be added back, since that was the net worth of repurchase activity relating to preferred shares from the U.S. Treasury department. Therefore, American Express took in 27 cents per share from continuing activities. According to this Reuters piece, that number met expectations.

The Reuters article also points out that revenues fell by 18% and that net charge-offs increased. Not a great picture. Reading through the press release, an investor might come away with a feeling of dread. Management mentions the not-so-strong spending by its cardmembers and the fact that loan losses are at historic levels.

After yesterday's closing bell, Capital One Financial (NYSE: COF) reported a second-quarter loss of 65 cents per share. The quarterly loss included $461.7 million COF repaid to TARP and a $38 million dividend payment. Excluding these payments, COF saw a quarterly profit of 53 cents per share. The Street expected COF to lose 73 cents per share, so the company managed to top expectations. Nevertheless, the company noted that its results were pulled lower by credit card losses along with the repayment of the government funds.

COF managed to make money excluding items, but a loss is still a loss. While the company noted that people have been a bit more defensive in their spending, I'm guessing that this may change. Remember that unemployment is at record highs, which may lead to more people to depend on credit cards (if they have them) to pay for necessities.

"This is a great time to be a banker," New York Times columnist Floyd Norris says, somewhat tongue-in-cheek. Jabs about bailouts and huge bonus payments aside, it's true that banking system is finally seeing rational pricing of risk -- and that means earnings power has greatly increased for deposit-taking banks. If you have a savings account or money market, you might have noticed that your interest payments have dried up to a pittance; the interest you aren't being paid is dropping through to banks' bottom lines.

Looking at today's earnings report from Citigroup, Inc. (NYSE: C), for example, is useful to see how the economics of the industry function, and whether Citicorp -- the "good bank" as Citigroup works to split itself -- will live up to the promise CEO Vikram Pandit attributes to it. In a company press release, Pandit said, "Citicorp is our core franchise and will be the source of Citi's long term profitability and growth. Citicorp is unique with institutional and consumer businesses operating on an unmatched global footprint."

After a nifty rebound off a 52-week low of $5.73, industrial and financial services giant General Electric (NYSE: GE) is in a weird place. The company's shares are trading at around $11.75, which is well below the $15 levels achieved in early May. This would seem odd as GE appears to be well positioned for the Green Shoots Scenario. The company has a big presence in alternative energy, health care solutions, and industrial products -- all big beneficiaries of both the Obama stimulus package and a nascent economic rebound.

So why does the market seem to be scared of GE? A couple of key reasons. First, GE's investments in commercial real estate (CRE) are looking increasingly toxic as the rate of CRE failures soars and CRE debt remains difficult to roll over.