I'm trying to figure out what the proposed Government bailout and the short selling ban will have on FHN. Any openions would be appreciated. It may be too early to tell since the package is still being written. I guess one thing is clear - if there is selling tomorrow, it will be people selling actual stock and not short sellers. That could be telling. On the other hand, if there is a lot of buying, that would be from people actually wanting to own the stock or shorts covering. Hard to tell which. Investing these days is like owning a pet cobra.
and by the way...the SEC has already amended the short selling restrictions. You can short so long as you are market making or hedging...just not speculating. How they define all of that and limit it I do not know. However, this will keep the hedge funds going...
I don't think investors care if those write downs happen in one day or over ten years...as long as they know what the write downs are going to be! Investors have had no confidence in the value of any of these junk assets, the sooner they find out what the true market value is, the sooner we get a recovery in the banking sector...at least for the banks that aren't poised to fail. I strongly believe that FHN will remain standing when this cycle is all over with.
Now that Goldman Sachs and Morgan Stanley are bank holding cos...they become potential acquirors of First Tennessee Bank and potentially all of First Horizon.
The direction of this stock next week will be influenced by the factors you mention. The ultimate price that the government pays for problem mortgage debt instruments will be the major factor in determining how much the banks need to write down those assets.
My plan would call for a five year forbearance, by bank regulators, in writing off bad assets and raising new capital as long as liquidity is adequate and no fraud or crimes are taking place. This would have a one year maturity and renewal annual for up to five years to give the banks time to recover from the massive issues at hand.
Good point. Do you think the current FHN loan loss provisions are adequate to cover our loses assuming the Government goes ahead with the proposed auction plan? I don't know what valuation they are using for the default loans. If they become mark to market at 50% valuation, we will have one big loss to report this year, maybe more that the current provisions. Any thoughts?