Investing News: Will Banks Be Crashing?
One of the things to be wary of right now are financial stocks. Financial sector stocks are rather volatile, and there are rumors that some banks will be crashing. Indeed, some have already. The FDIC is running three banks right now. One of the banks in my parents’ town in Idaho, ANB Financial (an Arkansas based bank), has already failed. MarketWatch reports on the current bank failures — and what may come:
Only three banks have failed so far in 2008. But that number is set to surge as the credit crunch slows economic growth and hammers some lenders that grew too fast during the recent real-estate boom, experts say.
The roots of today’s banking crisis grew out of the boom and bust in the real estate market. Lenders originated more and more mortgages, while other banks, particularly smaller and medium-sized institutions, ploughed money into construction and development loans.
This news also fits in with what Federal Reserve Chair Ben Bernanke said toward the end of February. He warned that some of the smaller banks might be susceptible to crashing as the economy finds itself in a “freefall.” Bernanke is not the only one who worries about the state of US banks and the economy. Warren Buffett, billionaire investor, has made comments about a long and deep US recession. Buffett even believes blame for this whole mess rests squarely on the shoulders of the banks, reports BloggingStocks:
To keep the daily excitement going, he made a statement that U.S. banks were to blame for the current credit crisis. According to Reuters, “The banks exposed themselves too much, they took on too much risk …. It’s their fault. There’s no need to blame anyone else,” he said.
So, when choosing financial sector stocks, make sure that you choose carefully. And remember: venerable institutions are not completely immune. Look what happened to Bear Stearns.
Disclaimer: I am not an investment professional. Nothing in this piece or on this Web site should be construed as investment advice. Before making investment decisions, do your own research and/or consult with an investment professional. All investment comes with the risk of loss. You are responsible for your own investment decisions.
Tags: stock market, investing news, investing blog, Ben Bernanke,
economy, investments, financial stocks
May 26th, 2008 at 9:21 am
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June 6th, 2008 at 10:34 pm
[…] banks are already expressing their losses, and the credit crisis may cause some banks to fail. Indeed, some have already […]