If you’re thinking that our economic crisis was in some way the fault of homeowners who couldn’t afford their mortgages, please consider the following:

At the end of 2007, there were roughly $1.4 trillion in sub-prime mortgages in this country.

If “irresponsible sub-prime borrowers,” caused the meltdown, then $1.4 trillion would have solved the problem in its entirety, right? Because that’s all the sub-prime loans there were.

But, between the Federal Reserve, the FDIC and the Treasury over $13 trillion has been pumped into financial institutions to fix the “housing correction,” which is what Hank Paulson was still calling our economic collapse as of November of 2008.

At the end of 2008, there were $11.9 trillion worth of mortgages in this country. So, with $13 trillion, the government could have paid off every single one… and still had a little over a trillion dollars left over.

But there’s a lot more to the economic problem than that, explains Nomi Prins, my new favorite financial uber-genius and author of “It takes a Pillage.” Wall Street had been playing the leverage game… somewhat like they did in the 1920s, I suppose… but on mega-steroids. Leverage means borrowing on assets, and Wall Street banks were leveraged by 30:1, commercial banks by 10:1, not including their “off-the-balance-sheet” holdings, which could make their leverage ratio significantly higher in many cases.

So… in “Pillage,” Nomi Prins explains in terms anyone can understand that factoring in the leverage at 11:1, we’re looking at a $140 TRILLION economic problem… yes, you read that correctly… that’s trillion, with a ‘T’. Our Wall Street bankers, through the abuse of the securitization process and excessive amounts of leverage, created a potential tab of $140 TRILLION for the people of this country to pick up.

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Data taken from: http://www.fdic.gov/bank/individual/failed/banklist.html

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Three attempts to get above resistance.

And today it’s finally above that level. Hopefully will build support here and go on to fill the gap.

• 13ema is turning up and should cross over 34ema soon.
• Oscillators and volume look good.

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$RIFIN broke down. Fibonacci retracement targets are on the chart.

• 50MA acting as support at the moment
• 20MA turning down
• Stochastics and MACD going negative

Going to trade (FAS: 90.42 -0.58%) and (FAZ: 25.99 +0.54%) off this chart.

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Both have been dead in the water for the last 6 weeks.

I think holding FAS + writing calls is (was?) the best strategy here.

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Today is one of those days. (FAZ: 25.99 +0.54%) is up rought 1% less than (FAS: 90.42 -0.58%) is down. They may even out at the end of the day, but from what I’ve seen before, this will not be corrected.

I suppose it could be because of the afterhours or premarket action, but not sure.

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Following is a summary of the capital requirements of 10 banks resulting from U.S. regulators’ stress tests, according to people familiar with the matter. The Federal Reserve is scheduled to release the results of the tests on the 19 largest U.S. banks tomorrow.

Click to enlarge

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Clean breakout on higher volume…

Or this:

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Whitney: Number of Banks Could Be Halved

Meredith Whitney made a name for herself by issuing dire predictions that proved correct, and at this week’s Milken Institute conference in Beverly Hills, Calif., she upped the ante.

The former Oppenheimer & Co. analyst, who recently started Meredith Whitney Advisory Group LLC, said the number of banks in the United States could be halved by the end of the current crisis.

“We could see [the current] 8,000 institutions go down by half or greater,” she said.

Meredith Whitney Despite bankers’ complaints about the Troubled Asset Relief Program, Whitney said she does not expect to see many of the top banking companies repay their government capital anytime soon. They will need the money to rescue weak sisters.

“You’ll see so much deck-chair movement that much of the TARP money will not be around to be repaid because many banks will be expected to absorb their neighbors,” she said. “Big banks will be forced to absorb all the liquidity that is coming out of the market and what will be interesting is if some of the smaller banks that get private capital will start to consolidate.”

Source and full text: BankInvestmentConsultant

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