Bleeding the banks to death

With endless lawsuits, it's tough to forecast anything, let alone earnings.

By Jim Cramer Oct 4, 2011 9:47AM

the streetI had to laugh this morning when the "shocking" news came out that Deutsche Bank withdrew its profit forecast because of the uncertain times we are in.


Profit forecast? How quaint. How sweet that they even had one.


In truth, isn't that what really ails the banks right now, both in the U.S. and in Europe? Over there, the sovereign debt holdings are humongous. And why shouldn't they be? What was the safest paper to be in?


Over here, we know the holdings are better. But where is the earnings power? What is the earnings power, for example, of Bank of America (BAC)? What is it? Does it have any? Does the government or governments want them to be in business? And what the heck is with that Countrywide preferred stock that is blowing out? Will they Chapter 11 it? Can they?


We can't get our arms around these banks, because they either have to deal with the yield curve from hell, like the regionals, or they have so many legal bills and exposure to so many lawsuits from faulty mortgages issued that it is impossible to fathom what the real earnings will be.


Related Articles

That's why it is so difficult to try to call a bottom in this group. There is no coordinated attempt by any part of the federal government to solve these lawsuits. Why bother? They couldn't put any of the bankers in jail. So why not just bleed them to death?


So it's one more day in the great unwinding of the big move post-TARP three years ago, where the group is settling down to brain-dead levels and the lawsuits never end. Between Morgan Stanley (MS) and whatever the heck the worries are now -- total whack-a-mole there -- and Bank of America, we've got forecasts and actual earnings that mean nothing. And remember, both are solvent and earning money.


I keep thinking, though: I were an international hedge fund and I couldn't bet against European banks, why not short American banks? It isn't like you are betting against Canadian banks with a good yield and decent growth. You have almost no yield, and the biggest line items are fines and attorney fees that seem unable to be capped.

Earnings forecasts?


Good luck.


At the time of publication, Cramer was long Bank of America.


jim cramer
Jim Cramer
is a co-founder of TheStreet and contributes daily market commentary to the financial news network's sites. Follow his trades for his charitable trust.

Oct 4, 2011 11:12AM

As I stated before, it is the banks fault why they are in this mess to begin with.  They, as many large corporations (and the US Government) do not know how to operate within a budget!


Diversification and bad loans...and GREED!!!

Oct 4, 2011 2:48PM

..And what the heck is up with BoA paying 4.4 BILLION dollars in bonuses in 2010 when their company was sinking under mountains of expensive litigation, bad mortages, countrywide, and everything else?


What were they thinking?


Oh, yeah.  Like the typical Republican Rich do.  Soak the middle class to pay for our greed. (that's why BOA is targeting the lower/middle class with this $5 Debit Card fee that does not apply to their PREMIUM account holders)


And they have good ol' Jim Cramer as their cheerleader trying to look intelligent, but is an excellent representation of that rich mentality. 

Oct 4, 2011 1:52PM
Bleeding the banks to death?????????????????


Someone came up with the idea of leveraging OUR DEPOSITS, NOT THIER MONEY to the tune of 40 or 50x and it wasn't the people that made it possible for those banks to still actually be in business .................not to mention the seemingly neverending bull shlt of being told that these nimrods are the "best and the brightest" as some cockeyed justification of thier 5 lifetimes worth of income in yearly bonuses are supposed to be acceptable to the corporate stockholders!


Let them eat cake (cow pies)!

Oct 4, 2011 11:33AM
It wasn't too long ago that Cramer was recommending Bank Of America.  I also remember him extolling AIG.
Oct 4, 2011 2:18PM
You don't have to wonder why all these big banks have such huge legal bills.  It's because their business models basically say that they will do whatever they want and if caught, then apoligize or pay the fines.  This has been going on for years.  However, their greed and lack of respect for their customers and the law have only just begun to catch up with them.
Oct 4, 2011 2:45PM
Let the chips fall where they may.  No more bail outs. No more special treatment of wall street ot the banksters.  May be they will think next time they inflat a market to ther advantage and completely destry out encomomy, education, future.  F em
Oct 4, 2011 2:11PM
Why invest in anything?  You can't make anything on energy, oil, or gas because of "speculation" they claim.  Bank are shot because they forgot they were supposed to be making money taking in consumers' money and lending it out as solid mortgages.  Now, they make bad mortgages and try to cover those losses by hiking up all the fees and interest rates on the customers they have left. IPOs aren't even available to small investors much of the time until all the juice is drained out of them.  Wall Street is mostly a pyramid scheme with the little people at the bottom end.  Cramer doesn't own any of the stocks he recommends because the only way you can make money in this game is to get somebody to pay you to talk about it or to write books about it.  If he was such a wizard, he would be so rich, he wouldn't be writing this blog.  Why in the world would anyone want to buy Bank of America, one of the scummiest companies on the planet, who just recently came up with the brilliant idea of charging all their debit card customers another $5 for the privilege of using their card?  Thanks for that piece of advice, JIM!  Did this come to you in a dream?
Oct 4, 2011 2:40PM
I agree, there probably will be a mass exodus to credit unions.  Especially if regular banks start charging fees for everything.  Banks should be making money off loans, not off transactions off depositors.  Otherwise, say good bye to your deposits and thus your ability to make loans which should be the meat of your banking business anyways.
Oct 4, 2011 2:06PM
No seriously!  Haven't the bankers STOLEN enough?   I guess Jimmy doesn't think so.
Oct 4, 2011 2:43PM
JIm Cramer, B of A and Merrill Lynch are all being sued by for fraud, racketeering and other RICO Act charges.
Those law suits he's whining about include the one that will end up costing him millions. Overstock has already won similar cases. This one begins in December.
Oh yeah, btw. Those law suits against the banks are very much deserved. They brought it upon themselves and no, BofA is not solvent. It's simply hiding it's bad debt as long as it can until it has no other choice but to do a massive write-down and it's coming soon.
I think it says a lot about the mindset that MSNBC would continue allowing a soon to be convicted criminal to write for its website.

Oct 4, 2011 4:47PM
The banks should have never been bailed out in the first place.  The good ones should have prospered, and the bad ones should have been left by the wayside.  End of problem.
Oct 4, 2011 4:38PM

The bandit bankers deserve all these lawsuits!!!  If they weren't so greedy and treated people fairly maybe they wouldn't have these problems.    NO sympathy from me.
Oct 4, 2011 4:25PM
Yeah if the government won't spank the banks/campaign donors the account holders CAN. 
Oct 4, 2011 2:21PM
There may be a mass exodus on Nov 4th of people transferring their money to credit unions.  There has been a call to action within the 99% to vote with our accounts. 
Oct 4, 2011 4:25PM
We are in a credit union now, too. We want to sit back and watch all the corrupt,greedy, big banks crash like they sat back and watched while millions of Americans lost their homes and millions of students were put into long term debt  because of them. OCCUPY WALL STREET!
Oct 4, 2011 2:08PM

The article ends with :  At the time of publication, Cramer was long Bank of America.


Long ? When hell freezes over Cramer might be able to dump his BoA stock only after raving about how great they are during one or two of his shows. Long indeed.


Oct 4, 2011 2:03PM

Jimmy Cramer speaks/writes for the greedy.   What a surprise!  Who writes for the hard working people???  I guess there's no money in it?


Many poor... few rich...

Oct 4, 2011 4:17PM
Amazing, so the banks rip of consumers on a large scale on a daily basis, not to mention the government,  they hand out bonuses to their executives like its candy and yet the federal government should step in and clean up their mess AGAIN, by clearing up all thier lawsuits.  Do I love lawyers, not really, but I certainly think the banks deserve exactly what the lawyers are giving them.   Perhaps someoen sooner or later on one of the boards of one of the leaching business, will wise up and get rid of the top heavy, non- producing, money sucking loafs.
Oct 4, 2011 4:24PM

"There is no coordinated attempt by any part of the federal government to solve these lawsuits. Why bother? They couldn't put any of the bankers in jail. So why not just bleed them to death?"


Surely you aren't suggesting that people that were fraudulently persuaded to setup usurious mortgages, or entities that were fraudulently sold these toxic assets forego their right to litigate?


Furthermore, it wasn't so much a matter "couldn't put them in jail" but wouldn't so much as file charges.


Isn't this the almighty free market at work? Banks behaved poorly and now the market is making them suffer for it. Why should the government step in to save them from pain yet again?


All these people suckling at the teet of the financial institutions don't get to have it both ways. They can't cry "foul" when the government won't intercede on their behalf but the tell them "hands off" when they attempt to place even modest regulation on increasingly exotic (read: dangerous) profit seeking vehicles.

Oct 4, 2011 4:10PM
Awww, poor widdo banks.  Da goverment is being so mean!

Please note, not all banks are being sued, not all banks are suffering from their relentless greed that got them into the messes they are in now.  I transferred all my money from B of A last year into a credit union.  I encourage as many others to do so as possible.  Even if the government doesn't bleed them to death, maybe we can help.
Please help us to maintain a healthy and vibrant community by reporting any illegal or inappropriate behavior. If you believe a message violates theCode of Conductplease use this form to notify the moderators. They will investigate your report and take appropriate action. If necessary, they report all illegal activity to the proper authorities.
100 character limit
Are you sure you want to delete this comment?


Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.


StockScouter rates stocks from 1 to 10, with 10 being the best, using a system of advanced mathematics to determine a stock's expected risk and return. Ratings are displayed on a bell curve, meaning there will be fewer ratings of 1 and 10 and far more of 4 through 7.

124 rated 1
266 rated 2
452 rated 3
702 rated 4
671 rated 5
604 rated 6
640 rated 7
495 rated 8
267 rated 9
158 rated 10

Top Picks




Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.

Contributors include professional investors and journalists affiliated with MSN Money.

Follow us on Twitter @topstocksmsn.