Friday, September 26, 2008

More Cliff Diving

by Bill McBride on 9/26/2008 12:47:00 PM

Update from MarketWatch: Counterparty credit risk jumps on Wachovia concern

The CDR Counterparty Risk Index, which tracks credit-default swaps on leading banks and brokerage firms, surged more than 100 basis points to 430.2, close to a record. A basis point is one one-hundredth of a percentage point.
...
Credit-default swap spreads on Wachovia widened by 827.2 basis points and now trade between 28% and 33% "upfront," according to CDR.
...
"Wachovia is now trading at distressed levels, raising the specter of another major U.S. bank failure in the near future," CDR said in a statement.
National City stock is now off 50%.

Wachovia is off 30%.

Reader BR notes that investors are reacting to JPM's marks on WaMu's loan portfolio. These published marks will force the regionals to write down the value of their paper too.

As I mentioned earler, investors appear to be asking "Who is next?"

I don't think either of these banks will be seized today, but based on the pace of failures, I'd guess a bank failure is likely.