After Citi, is Bank of America next?



NEW YORK (Reuters) - A government rescue plan has eased investors' concerns about Citigroup Inc, but mines lurking in the balance sheets of rivals including Bank of America Corp could still tempt short-sellers.

Bank of America, the No. 3 U.S. bank by assets, has loaded up on mortgages as the world's largest economy wrestles with the worst housing market since the Great Depression.

The Charlotte, North Carolina-based bank further heightened its exposure to home loans by acquiring Countrywide Financial Corp, the largest U.S. independent mortgage lender and agreeing to buy Merrill Lynch & Co, which owns the world's largest retail brokerage.

If losses on mortgages and other debt securities mount significantly, the bank may see the ratio of equity to risk-weighted assets, known as Tier-1 capital, dwindle to alarmingly low levels.

"I would expect there are more banks who are in dire straits and more who can expect to be helped," said Michael Farr, president of investment management company Farr, Miller & Washington in Washington, D.C. "The share price makes it look like Bank of America might be next in line," he said.

Before Monday's stock market rally, Bank of America shares had lost 52 percent in November alone, making them the second biggest decliner for the month in the KBW Banks index after Citigroup.

Analysts at independent research company CreditSights forecast that in a scenario where the commercial and residential real estate markets really tank beyond banks' expectations, Bank of America would have a Tier-1 capital ratio of 7.15 percent.

The minimum that regulators seek to consider a bank "well capitalized" is 6 percent, but any ratio near or below 7 percent tends to spook investors.

Bank of America declined comment.

CreditSights also expressed concern about Wells Fargo & Co, which it said would have a Tier-1 capital ratio of 6.98 percent under its worst case scenario. Wells Fargo recently agreed to buy Wachovia Corp.

Under the same assumptions, and before the government's latest investment, Citigroup would have a Tier-1 capital ratio of 8.64 percent.

Wells Fargo, based in San Francisco, declined to comment.

To be sure, by some measures Citigroup looks worse than Bank of America and Wells Fargo, most notably the ratio of tangible assets to tangible equity, a metric on which some investors have focused.

Citigroup's tangible assets are about 42 times shareholder equity minus intangible assets, compared with 11 times for Bank of America.

The U.S. banking system is broadly undercapitalized, perhaps to the tune of more than $1 trillion, and the only investor that can bail it out is the U.S. government, analysts said.

"The banks already have an enormous hole to plug, and the recession will make that hole larger," noted Daniel Alpert, investment banker at Westwood Capital in New York, estimating banks may need to write down $1 trillion more in bad debt, in addition to the roughly $750 billion announced so far.

TOXIC MORTGAGES

Bank of America, through its acquisition of Countrywide, has more than $250 billion in residential mortgages and while it has stopped offering some of the most toxic types of mortgages, chargeoffs in the portfolio are increasing.

Wells Fargo inherited a portfolio of more than $260 billion in consumer loans when it acquired Wachovia, and JPMorgan Chase & Co acquired exposure to some of the most risky classes of mortgages, in addition to its own large consumer loan portfolio, when it bought Washington Mutual Inc.

Still, there are big differences. Critically for Citigroup, investors lost confidence in the company and its management after it failed to buy Wachovia Corp, thereby losing an important potential source of deposit-based funding, analysts said.

"The difference between Citi and the other three is that Citi clearly had more suspect management," said Mal Polley, chief investment officer at Stewart Capital Advisors in Pittsburgh. "They had not done enough to take the fat out of the system and right the ship," he added.

But management at Bank of America and Wells Fargo, and even JPMorgan, widely regarded as the bank that has best survived the credit crisis to date, will need to allay investors' concerns about their capital position as financial conditions worsen.

And if their losses are big enough, or investors fear they will be big enough, Bank of America and Wells Fargo could turn to the same place Citigroup did: the U.S. government.

"I definitely think other companies will need this help," said Paul Miller, analyst at Friedman, Billings, Ramsey & Co in New York.

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During his campaign, President Joe Biden survived scandal after scandal involving his son Hunter — the Ukraine/Burisma scandal, the laptop scandal, the one involving a stripper from Arkansas and a long-lost child. And yet, after it all appeared to have been swept under the rug, Hunter has now released a memoir — "Beautiful Things."

Filling in for Glenn Beck on the radio program this week, Pat Gray and Stu Burguiere discussed Hunter's "horrible" response when asked on "CBS This Morning" if the laptop seized by the FBI in 2019 belonged to him and reviewed a few segments from his new book, which they agreed raises the question: Is Hunter trying to sabotage his father's career?

Watch the video below for more:


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Countless corporations — from Delta Air Lines, Coca-Cola, and Porsche to UPS and LinkedIn — are calling out the Georgia voting laws, calling them "restrictive," "racist," and "discriminative." Meanwhile, words like "stakeholder" and "equitable" are starting to show up in their arguments.

On the radio program, Glenn Beck gave the "decoder ring" for what's really going on here, because our society is being completely redesigned in front of our eyes.

There's a reason why all these big businesses are speaking out now, and it has very little to do with genuine ideology, Glenn explained. It's all about ESG scores and forcing "compliance" through the monetization of social justice.

Glenn went on to detail exactly what ESG scores are, how they're calculated, and why these social credit scores explain the latest moves from "woke" companies.

Watch the video below to hear Glenn break it down:

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Dallas Jenkins is a storyteller — and he's telling the most important story of all time in a way that many believed was impossible.

Jenkins is the creator of "The Chosen," a free, crowdfunded series about the life of Jesus that rivals Hollywood productions. And Season 2 could not have arrived at a better time — on Easter weekend 2021. Church attendance has dropped, people are hungry for something bigger than all of us, and many are choosing social justice activism, political parties, or even the climate change movement as "religions" over God.

This Easter weekend, Jenkins joined Glenn on the "Glenn Beck Podcast" to discuss the aspects of Jesus that often get overlooked and break through the misconceptions about who Jesus really is to paint a clear picture of why America needs Emmanuel, "God with us," now more than ever.

Watch the full podcast below:

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Award-winning investigative journalist Lara Logan joined Glenn Beck on the radio program this week to argue the Biden administration's border crisis is "enabling" drug cartels, allowing them to exploit migrants, use border wall construction roads, and cross the border much more easily.

Lara, who has witnessed and experienced firsthand some of the worst violence around the world as a war correspondent for CBS News, told Glenn it's "not an overstatement" to call the cartels in Mexico "the most violent and powerful criminal organizations on the face of the earth." And while they're "at war with us, we've been asleep at the wheel."

But Lara also offers solutions that the U.S. can enact to stop these horrific atrocities.

"There's more than 30,000 Mexican civilians who are massacred every year in Mexico by the cartels. And that's just the bodies that the Mexican government owns up to or knows about, right?" Lara said. "There's Mexicans buried in unmarked mass graves all across the country. I mean, everyone knows that the violence of the cartels is not like anything anyone has ever seen before. It even pales in comparison to, at times, to what terrorist groups like ISIS have done."

Lara went on to explain some of the unspeakable acts of violence and murder that occur at the hands of the Mexican cartels — 98% of which go uninvestigated.

"That's not unprosecuted, Glenn. That's uninvestigated," Lara emphasized. "[Cartels] operate with impunity. So the law enforcement guy, the policemen, the marine, the National Guardsmen, who are trying to do the right thing, who are not in the pocket of the cartels — what chance do those guys have? They've got no chance. You know where they end up? In one of those unmarked graves."

Watch the video below to catch more of the conversation:

(Content Warning: Disturbing content)



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