Banks Are Worth What Their Stock Prices Say They Are

Several prominent bank analysts came out with statements yesterday saying that the largest US financial firms would post more heavy losses and that their accounting methods would obscure the worst of it. George Soros, the grand old man of the hedge fund business, repeated his belief that the banks are insolvent. If he is right, earnings are irrelevant.

All of these comments cast the Treasury as a collection of desperate people, cornered by the faltering financial system, who are willing to pull any rabbit that they can find out of their hats. This makes the new Geithner plan for public /private partnerships to buy toxic bank assets look like a carnival show. It was not heartening to see that the Treasury admitted that it did not have many takers for this new program, so it extended the deadline for applications by two weeks until April 24. Unfortunately, world class financiers keep track of things like dates. Those who have passed on the opportunity so far will not be rushing in just before the new deadline.

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Stocks Mentioned: Bank of America (NYSE: BAC), Citigroup (NYSE: C).

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