Financials Take Hit
November 15, 2007
It isn’t just homeowners who are feeling the current financial bite. This week, the Dow dropped more than 220 points, signaling what might be the beginning of a troubled season for investors. One industry that is being hit hard is the banking industry. Major banks warned of losses on their debt this week and that news brought about a selling frenzy as many investors began to believe that the credit woes of late may not be over for some time to come.
Three of the largest financial institutions (Bank of America Corp., JP Morgan Chase & Co. and Wachovia Corp.) all reported that the current credit crisis will bring about yet another dismal round of heavy losses during the upcoming fourth quarter.
This will be on top of the big hits they have already seen during the third quarter. Much of the losses were blamed on sub-prime mortgage defaults which have severely dampened their balance sheets. Worse still is that these three institutions were only the latest to announce bad news. Other institutions are seeing troubled waters as well.
E-Trade Financial, the financial services provider, announced that it, too, expects the value of its asset-backed securities to drop in overall value. The huge credit card leader, Capital One Financial Corp., said that it had an increase in October loan charge-offs and delinquencies which forced a drop in their value as well. Wall Street expects more of this same type of bad news during the forthcoming weeks