Finding info on bank's subprime exposure?

Here's an article from Fortune about BAC and Countrywide:

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Yes, but Buffett isn't a gambler, he's a highly successful, long-term investor. If Buffett is buying, it is probably the best recommendation you'll ever get.

Elizabeth Richardson

W. Wells, I thought this an interesting article on the lack of transparency in general of subprime exposure:

(dated March, 2007). Notice that Washington Mutual is not mentioned. Generally speaking, WaMu has been one of the ones hit hardest, behind Countrywide and maybe a few others it seems. You can google using {subprime exposure banks} and find more.

I agree with Elizabeth R. about Warren Buffett's savvy in general. He made the BAC purchase in the second quarter of

2007. It's less than 1% of his portfolio. With this being such a small stock position, one could say his risk was small. Still I wonder what Buffett says about the disconnect between what he knew then and what we know today, hindsight being 20/20 of course.

December. Many analysts predicted this move, based on WaMu fundamentals. National City Corp. cut its dividend by half in early January. Citigroup has not ruled out a dividend cut. But importantly and relevant to your question, the media has not made similar predictions for BAC. I hope it's not too obvious, but you want to look for announcements about bank "writedowns." These denote a reduced appraised value of assets, in this case tracing back one way or another to reduced valuation of mortgages. Articles such as

$12B/3229599.html suggest that BAC's writedowns are not nearly as severe as Citigroup's.

It's a highly anomalous time for dividends, particularly (or maybe only) in the finance industry. This is trickling through the whole economy, as I am sure you have read. "Depression" is a nasty word, but I think it's important for laypeople to understand that an overabundance of credit (c.

1929 and in the last few years) can lead a nation to economic chaos and sometimes disaster. Too much credit is when wealth all of a sudden disappears, because it was built on a house of cards in the first place.

I think the government is smarter today and we will not have a depression, but I am seeing a year or more of recession. Sit tight, and reinvest those dividends now when so many stock prices are down, so as to buy more stock at bargain prices. I can't say that WaMu is a good buy now, but even with the dividend cut (and due of course to the fall in stock price) its dividend yield is now over 4%. This should entice at least some investors to keep holding it. Likewise with other bank stocks.

Alternatively, you may also want to look at Wachovia (WB) which is trading at very attractive levels. Good dividend too. The company has said the dividend is safe but we will have to see. I own a little bit of them.

Rather than getting individual bank stocks, you might also want to consider Ultrashor Pro Financials (UYG) a leveraged ETF that has tanked this year. It might be an excellent investment for the long term. I don't own any.

What do you think the government can do in this situation?

Out of respect for our moderators, I'll stick to what the government can do, not what it should do. The short answer is not much.

The Fed can lower interest rates, but that takes about 18 months to have much effect on the economy. The Keynesian possibility is to increase the deficit, either by lowering taxes (such as a cash rebate like was done in 2001) or increasing spending. That would have a more immediate impact on the economy, but it would require a massive increase in the deficit to have a significant effect.

-- Doug

If you are investing in a bank-manged security, they have to tell in the perspectus. Otherwise you only learn about it if it goes bad and the bank has to explain it in their annual profit nd loss report.

On the premise that a response may help U.S. investors understand the pros and cons of investing in U.S. based stocks, bonds, CDs etc., and so plan, here is a brief response, designed for casual chatter and nothing more:

Controls on money supply: Alter interest rates and taxes (individual, corporate, import etc.); set tighter or looser controls on lending standards and amounts banks must maintain "in reserve." Etc. One recent interesting example in this vein involves the government (if need be) granting an exception to Bank of America so it can buy Countrywide Financial. Without this exception, BAC would be in violation of a law that says no single bank yada can hold more than

10% of the country's money deposits.

Controls on stock markets: The stock market is abruptly and automatically shut down (to give investors a chance to come to their senses, say, in an irrationally-based panic) when certain types of declines take place.

Controls on jobs and products: Nationalize certain industries to ensure commerce flows as freely as possible, promote creation of more jobs; prevent price gouging; require lenders to make special allowances for those facing foreclosure; etc.

Controls on foreign policy: War or no war.

Econ is not an exact science, of course, and naturally there is no precise answer. I do think it's important to understand that changing the "financial health of a society" requires taking a long view. It's a collection of actions that over time (sometimes several years or more) causes change. Never expect immediate correction of a situation like that we are in today, with poorer people losing their homes and wealthier people seeing their investments take huge hits.

One has to consider the means by which cultural change is effected (sic). It's social science, which is as inexact or synonymous with economics.

I think folks who are most interested in improving their own lot have to look out for the good of society as a whole. Government is supposed to look out for society as a whole, but it helps if the populace "gets" that the reason for doing so is not for lame-assed, "fuzzy feel good" results. Rather doing so is a matter of sound financial reasoning. See for example Safeway CEO Steve Burd's commentary on how "investing" in the physical health of his employees via XYZ has improved Safeway's financial health. What is good for all does help the economy profoundly, meaning more are more likely to be innovating in business, earnings are up, folks have jobs so you and I can have growing dividends from growing company earnings, the human condition (longer life expectancy yada) improves via technological improvements etc.

Note: My thoughts are influenced via early study at the feet of a student of Nobel prize winning economist Paul Samuelson. He being something like an early (the earliest?) composition of Ben Graham, Warren Buffett, Alan Greenspan (hmm, to those in the know), Jeremy Siegel, Robert Shiller, and others who are regularly highly regarded.