January 20, 2009
January 20, 2009 by admin
The inauguration of President Barack Obama is a historic day and one that was supposed to bring on hope of change for the United States. The stock market must have missed this memo as it sold off to levels last seen in November of last year. Financial stocks including Bank of America, Citigroup and JP Morgan Chase were down between 15-25%. The banking industry is has been in a free fall tailspin as mounting evidence that the U.S. economy will likely get worse in 2009.
Bank of America has gained attention as they were required to go to the government for an additional twenty billion in TARP funds following their merger with Merril Lynch and their fourth quarter financial reqults. Many analysts believe the company will require between 80 to 100 Billion dollars in the next twelve months as their capital position deteriorates further. The companies exposure to the eroding real estate market through their own lending and their purchase of Countrywide last year is likely to be an achiles heel for the bank until home values begin to stabalize.
The additional 350 billion of TARP money will be needed over the next sixty days as banks try to stall off their financial collapse and keep their capital ratios inline. The new President will certainly have many challenges in fixing the economy and it is likely to require trillions of U.S. funds via taxpayer guarantees to ensure that these banks and financial instistutions survive, a challenge that is likely to further damage the relationship between main street and wall street.