What a whirl wind banking crisis we have had.
First, the housing bubble busted and the banks got caught holding toxic assets that were backed by these stupid mortgages.
Paulson comes out and says the world is going to end if we don't bail these banks out and buy these toxic assets from them. The bill is voted down, the stock market is pushed down (with lots of help from the government IMO). The public gets scared and the bill passes. $700 billion of the taxpayers money approved to buy the toxic assets.
The money goes to the banks (as well as other institutes that have nothing to do with this
), and the stock market continues to crash. Does the money buy the toxic assets???? NO!
The banks continue to struggle and its about earning time. So the government steps in and changes the rules on how the banks can list these assets. All of a sudden, the struggling banks are announcing record breaking profits. We're talking an overnight change here.
Meanwhile, the government is doing their stress test. During this time, they prop the banks up and make sure they don't fall. The numbers come out and several of the big banks need billions of dollars to make sure they can handle the bad economy.
Bank of America needs $33 billion according to the test. So they go about getting this cash by selling more of their stock. 1.25 billion shares. This is called dilution. It follows most any thoughts on this process...supply and demand. The higher the supply the less the demand. You would think this would lower their stock prices (it usually does), but Bank of America's stock stayed strong. Once again, IMO, the government propped them up so they could sell this stock at a high price.
So, when will the government stop propping up these banks? Its going to be a big fall from here IMO.
Here's the kicker...All of the banks still own these toxic assets!!!!!