Banks are toast

What is happening with financial institutions? Suddenly there is a worldwide destruction going on. Not only in Europe as some pretend. Bank of America, American Express, Charles Schwab, Wells Fargo, Citi… all touching new lows.
Where is this coming from?
I can only give my humble take of the situation: a central bank ‘conspiracy’.

They waited until year end passed but are now taking the punch bowl away. Meaning: they limit the funding they provide to banks and adapt the value the collateral banks are giving in repo and other transactions, to more realistic (read: lower) levels.

Less funding, more trouble.

This is a coordinated move.
Banks were warned in September/October this would come. It seems they were not able to clean up the mess. So this is going to end in tears… Err: in nationalizations.
Dollar strength is the direct consequence: the use of bilateral swaplines makes the dollar rise temporary. Just as three months ago.

More will come:

Jan. 20 (Bloomberg) — The U.S. Treasury, under pressure to revive lending, is demanding monthly reports from the banks that received the most capital from the government’s $700 billion rescue program.

Neel Kashkari, the official who administers the Troubled Asset Relief Program, wrote to Citigroup Inc., Bank of America Corp. and 18 others on Jan. 16 seeking figures on business and consumer loans. Treasury also wanted details on purchases of mortgage-backed and asset-backed securities, according to documents obtained by Bloomberg News. Kashkari will stay for a few months after President-elect Barack Obama is sworn in today.

The message is clear: we gonna clean up this mess.

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