Best of the Week
Most Popular
1.Stock Market in DANGER of Strangling the Bears to Death - Nadeem_Walayat
2. Germany Pivoting East, Exit US Dollar, Enter Gold Standard - Jim_Willie_CB
3.Flight MH17 – Kiev Flash Mob's Last False Flag? - Andrew_McKillop
4.Stock Market Crash Nightmare! - Nadeem_Walayat
5.Gold - The Million DOLLAR Question... - Rambus_Chartology
6.Gold And Silver – BRICS And Germany Will Pave The Way - Michael_Noonan
7.The Jewish Selfish Gene, People Chosen by God, Everyone Else is Goyim to Kill - Nadeem_Walayat
8.The Israeli Promised Land Dream - The Criminal Roadmap Towards “Greater Israel”? - Felicity Arbuthnot
9.Which Way is Inflation Blowing? Watch Commodities - Gary_Dorsch
10.U.S. Economy Quarterly Review and Implications for 2014-2015 - Lacy Hunt
Last 5 days
Stock Market Parabolic Collapse - Sowing the Seeds of the Next Depression - 30th July 14
How to Profit from the Russia Ukraine Conflict - 30th July 14
Greenspan: U.S. Economy Running Out of Buffer; Stock Market to See Significant Correction - 30th July 14
Rogue States And Loony Tunes - 30th July 14
Anne Elk’s Theory On Brontosauruses - 30th July 14
Our Totalitarian Future - Totalitarianism NOW! - 30th July 14
Stocks Bear Market Formation Revealed - 30th July 14
We Just Found “The Future” - 30th July 14
What the “Steak Bandit” Says About Asset Values - 30th July 14
Designer War By Default - Seven Types of Elite Madness - 30th July 14
Death of the U.S. Dollar? Gold an Inflation Hedge? Really? - 29th July 14
We’re Ready to Profit in the Coming Gold Price Correction—Are You? - 29th July 14
Their Economy Will Collapse, Including Ours - 29th July 14
Silver Prices – Megaphone Patterns - 29th July 14
Real U.S. Interest Rates - Fed Exit a Blue Pill? - 29th July 14
Why Israel Should NOT Exist, Just Like Any Other Rogue State - 29th July 14
Gold Still Looking Good - 29th July 14
Silver Price Set To Star - 29th July 14
Our Population Growth Totalitarian Future - 29th July 14
World War 1 Cause and Consequences - The Planned Destruction of Christendom - 29th July 14
Will Crashing Commodities Crash the Stock Market? - 29th July 14
Ukraine MH17 - Washington Thinks Americans Are Fools - 29th July 14
Stock Market Bubble Warning - 29th July 14
Gold Price and U.S. Dollar’s July Rally - 28th July 14
Second Quarter Corporate Earnings: Marching Toward a Strong Economic Recovery - 28th July 14
Time to Put a New Economic Tool in the Box - 28th July 14
Mossad in Gaza, Ukraine and the Cult Of The All-Powerful Elite - 28th July 14
Elliott Wave Gold Price Projection Since 1970 - 28th July 14
Investors Remain Uncertain As Stock Fluctuate Near Long-Term Highs - Will The Uptrend Extend? - 28th July 14
The Mass Psychology Of Decline - 28th July 14
Will the US Destroy the World? - Don’t Expect to Live Much Longer - 28th July 14
GDM and GDXJ Gold Stocks In-depth Look - 28th July 14
Stock Market One FINAL High? - 28th July 14
What It Means - Paradigm Collapse And Culture Crisis - 27th July 14
Wall Street Shadow Banking: You Can’t Taper a Ponzi Scheme: “Time to Reboot” - 27th July 14
6 Tips for Picking Winning Gold Mining Stocks - 27th July 14
Israel's War on Children, Exterminating the Palestinians Future - 27th July 14
Guilt By Insinuation - How American Propaganda Works - 26th July 14
Surprise Nuclear Attack On Russia To Liberate Ukraine - 26th July 14
Use "Magic" Of Gold/Silver Ratio To Greatly Increase Your Physical Holdings - 26th July 14
Derivatives Market Species Origins - Abuse, Props and Risks - 26th July 14
Stock Market Manipulation and Technical Analysis - 26th July 14
China’s Stock Market Finally Looks Like A Buy - 26th July 14
Ed Milliband Fears Israel Jewish Fundamentalist Gaza War Massacres Backlash - 26th July 14
The Big Energy = Power Battle Is Coming - 25th July 14
USrael - Zionists in Control of America's Goyim Brainwashed Second Coming Slaves - 25th July 14
More Weakness Ahead for Gold Miners - 25th July 14
Gold Price Strong Season Starts - 25th July 14
Geopolitics and Markets Red Flags Raised by the Fed and the BIS on Risk-taking - 25th July 14
Gold Lockdown Until Options Expiry - New Singapore Gold Contract Threatens Price Manipulation - 25th July 14
The Bond Markets, Black Swans, and the Tiny Spirit of Santo - 25th July 14
No Road Map For Avoiding The Future - 25th July 14
Israeli War Machine Concentrating Women and Children into UN Schools Before Killing Them - C4News - 25th July 14
Israeli Government Paying Jewish Fundamentalist Students to Post Facebook Gaza War Propaganda - 25th July 14
Why the Stock Market Is Heading For A Fall - This Time Is Not Different - 25th July 14
An Economic “Nuclear Strike” on Moscow, A “War of Degrees” - 25th July 14
BBC, Western Media Working for Israeli Agenda of Perpetual War to Steal Arab Land - 25th July 14

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

The Biggest lie in Stock Market History Revealed

US Banking Stocks Downward Spiral to Zero

Companies / Credit Crisis 2008 Jun 20, 2008 - 11:15 AM GMT

By: Mike_Shedlock

Companies Best Financial Markets Analysis ArticleOn Wednesday, BankUnited Financial Corporation Announced Public Offering of Stock .
BankUnited Financial Corporation (BKUNA) today announced the launch of a public offering of its Class A common stock, with gross proceeds of $400 million. The offering is expected to be pursuant to customary underwriting terms for a firm commitment offering of this type.


BankUnited expects to use the net proceeds from this offering for general corporate purposes, including contributing capital to its bank subsidiary. This offering was not greeted with open arms to say the least. Bank United was crushed 33% ahead of the news (who knew?) and another 19% the following day. Its stock now sits at $1.90.

Bank United Weekly Chart


Why Now?

Why didn't Bank United raise capital at $31, $20, $14, or even $8?

It's market cap today is $68 million. Now it wants to raise $400 million which is 588% of what the market says it's worth. If that dilution comes on top of the declines we have already seen, its share price will be something like 32 cents.

Problem Financials

  • Bank United (BKUNA) $1.90
  • Chorus Bank (CORS) $4.74
  • Washington Mutual (WM) $6.35
  • Indymac (IMB) $1.26
  • Ambac (ABK) $2.03
  • Keycorp (KEY) $11.35
  • MBIA (MBI) $6.45
  • Fifth Third (FITB) $9.75

Opportunities Missed

Every one of those companies had enormous opportunities to shed assets or raise capital. Now, BKUNA is doing so at $1.90 and Fifth Third at $9.75 (see Fifth Third Clobbered In Capital Raising Plan ). Ambac is in denial about the need to raise capital. So is Indymac.

None of these companies could see what was happening even though it was perfectly obvious to many of us.

So why now for Bank United? This is a guess on my part, but I suspect the Fed told Bank United to raise capital or be taken over. I also think this is part of the reason Paulson is desperately pleading for more Fed power. See my comments on this horrendous idea in Screams For More Fed Authority Get Louder .

Will $400 million be enough for Bank United?

To answer, let's take a look at the balance sheet from the latest 10Q .

Bank United Assets


Hmm. What have we here?

I see $748 million in mortgage backed securities at "fair value". Anyone want to hazard a guess as to how "fair" that value is?

What about a total loan portfolio of $12.3 billion? Isn't that a little excessive for a bank with a market cap of $68 million.

I also see $73.4 million in REOs - real estate owned. Anyone want to guess the fair value of that?Finally, I see Goodwill of $28.3 million that is most likely worthless.

But wait... There's more. Let's look at the liability side.

Bank United Liabilities


That's interesting isn't it? Bank United, a bank worth $68 million, is in hoc to the Federal Home Loan Bank for $5.86 billion.

Federal Home Loan Bank System


Inquiring minds just might be interested in the FHLBank System .

Mission:

"The mission of the Federal Home Loan Banks is to provide cost-effective funding to members for use in housing, community, and economic development; to provide regional affordable housing programs, which create housing opportunities for low and moderate-income families; to support housing finance through advances and mortgage programs; and to serve as a reliable source of liquidity for its membership."

Advances:

"FHLBank Advances. Advance lending is the FHLBanks' main business line. It currently represents about two-thirds of all the FHLBanks assets. These loans, known as advances, are well-collateralized loans used by members to support mortgage lending, community investment and other credit needs of their customers.”

FHLBank consolidated obligations are sold to institutional investors through the Office of Finance. The Office of Finance, which handles FHLBank transactions, is able to sell the debt at rates just slightly higher than Treasury bonds because FHLBank products are rated Aaa/AAA by Moody's and Standards and Poor's.

The FHLBanks frequently borrow short, primarily in the form of discount notes, while our membership tends to lend long, primarily to fund 15 to 30-year mortgages. At first blush, this may appear to be a term mismatch, but it's not. In fact, the FHLBank System intermediates on behalf of its members to reduce term mismatch risk and provide liquidity.

FHLBanks don't fund individual mortgages. They fund mortgage pools. Since these pools are constantly changing, they have no maturity. Consequently, the many term rates FHLBanks issue reflect their member needs, including the advances they use to minimize their own interest rate risk.

The FHLBanks are not the only prominent financial institution that operates this way. The U.S. Treasury does it, too.

Financial Highlights:
(As of December 31, 2006)

* $1.02 Trillion in assets
* $ 641 Billion in advances
* $ 98 Billion in mortgage loans
* 4.41% Capital to Asset Ratio
This Ponzi scheme cannot possibly be solvent. The only question is when it blows sky high.

By Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Click Here To Scroll Thru My Recent Post List

Mike Shedlock / Mish is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance, low volatility, regardless of market direction. Visit http://www.sitkapacific.com/ to learn more about wealth management for investors seeking strong performance with low volatility. You are currently viewing my global economics blog which has commentary 7-10 times a week. I am a "professor" on Minyanville. My Minyanville Profile can be viewed at: http://www.minyanville.com/gazette/bios.htm?bio=87 I do weekly live radio on KFNX the Charles Goyette show every Wednesday. When not writing about stocks or the economy I spends a great deal of time on photography. I have over 80 magazine and book cover credits. Some of my Wisconsin and gardening images can be seen at www.michaelshedlock.com.

© 2008 Mike Shedlock, All Rights Reserved

Mike Shedlock Archive

© 2005-2014 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Free Report - Financial Markets 2014