Monday, May 4, 2009

Bank Stock Short Selling Returns

Last year's financial implosion was founded in a lack of trust. Mid September found Wall Street credit default swaps soaring. Combined with naked short selling, financial firms teetered on the brink. Lehman Brothers and Morgan Stanley were targets. Lehman went belly up.

Treasury stress tests are the bloody water for financial sharks. Short selling and rising credit coverage are back. Reuters reported:

Citigroup's five-year credit default swaps widened by 70 basis points to 615 basis points, while Bank of America's widened by 25 basis points to 325 basis points

Ten days earlier, the Economic Times reported:

Citigroup’s credit-default swaps as of Thursday were trading at 557, up from 193 at the end of last year. By comparison, rival New York-based bank JPMorgan Chase & Co’s swaps are trading at 174.

Lehman Brothers Holdings Inc’s swaps were at 322 a week before the US securities firm filed for bankruptcy last

Citigroup and Bank of America have leaky boats. Will they get swamped and chomped? What about the other eight banks who need more capital? Stay tuned.