The economic outlook for June is not looking as promising as last months. Consumer spending took a huge beating in late April and May with figures showing losses of single digits. The housing market on the other hand continues to do well with sales up single digits as well. Unemployment will cross the 9% rate as General Motors announced it Chapter 11 bankruptcy and the world will continue to go round and round.

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In recent months we have seen small but steady increases in the consumer spending index, which is a great indicator of a moderate recovery. Despite the fact that this alone is not a guarantee of recovery, it is a good indicator of things to come especially as it has a direct correlation with the housing market, the stock market and the consumer confidence index.

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The truth is finally out. The government finally put out its results, and as expected they are not very good for everyone.

So which banks are doing well and which ones are not?

It is clear after this test that the bigger banks are hurting and will desperately need to raise capital. Based on the data provided, Bank of America, Wells Fargo and CITI are clearly showing need for more capital. Needing the most out of the entire group.

On the opposite side of  the scale, you will find banks such as BB&T, JP Morgan Chase and Capital One. These banks seem to need no additional capital and are doing well overall.

In order to be fair, there have been many elements to the test that are not openly discussed on the internet. The test was looking for total assets, market value, worst case scenario, and capital needed.

Lets break down some of the results and what they mean:

Bank of America: By far the largest bank in the US, Bank of America needs to raise the most capital and has the worst case scenario by far.  The need for capital is not an issue as the dollar amount needed is a very small percentage of the total asset value of the company, so its irrelevant but the worst case scenario is quite scary. Bank of America seems to be worth 10% market value of its asset size which means that people have lost faith in Bank of America entirely. The value is down and its worst case scenario is not looking good either and could create a huge problem for our economy if it fails and is taken over by FDIC.

Wells Fargo: Despite the need for more capital, Wells Fargo seems to be in a bad situation according to the data from the stress test, they are also a huge concern based on their worst case scenario collapse. Their capital need is of no concern due to the size of their assets and is no more than 10% which really is nothing to bank this large. On the other end, things are different from Bank of America as they do not share a market value that is 10% of the assets. They are weak but simply because of the amount of capital lost from the merger with Wachovia.

CITI Bank: Our friends at CITI are in danger, and they are in just about every way. There is nothing to say about CITI that can make them look good. Their worst case scenario is a disaster, their capital is short, and their concept is simply broken. There are many reasons why I believe that CITI will not be nationalized anytime soon but they should be.

Lets discuss the good guys.

BB&T: Despite doing well in this recession, BB&T is a lost bank in my eyes. They do not capitalize on anything at any time, and continue to remain conservative to levels that negatively impact the communities they serve. Their core model did keep them from being on the bad list and need no additional capital, so it works to some extent and saved them this time.

Capital One: Capital One banking was recently introduced in the US, as this major credit based company is moving into the retail side fast, and seizing the bad times to get in cheap. Their great credit model kept them from needing additional capital. This came as no surprise as their retail presence was very limited during sub-prime lending years and therefore saved them a bit of hassle. They have acquired many regional banks recently such as Chevy Chase Bank and will need to be monitored quickly.

JP Morgan Chase: Here is a bank that truly understands business. JP Morgan Chase is in my opinion the best credit bank to date. Its approach is conservative and yet convenient to its qualified customers. They tailor special products that are low risk for high risk clients, but they create opportunities for themselves with all credit segments. They offer banking on a limited basis and in major cities only.

The real estate market got us in this mess to begin with, some were taken advantage of and some knew exactly what they were getting into but the reality remains that in order for all of us to win and help the country recover, we must find a way to keep people in their homes.

If your mortgage is readjusting and you are about to see a huge hike, what can you do?

I get asked this question about 10 times a day and yet the solution is simpler than you think. There are two facts that you must keep in mind so that you don’t waste your time.

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Its obvious that we are facing bad times, but some places are feeling the pinch much more than others. So we are bringing you the areas that have been most affected and those that are in the clear.

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So here we are and the end of April nears. Lets look at some highlights of where we are so far in this economy. This month continues to show overall improvement for the economy but again shows no sign that consistency is here to stay.

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When people are fearful, be greedy. This is the best advice you will hear during a recession or an economic downturn. As we discussed in our previous articles, this recession is in most part mental, it is worst than it needs to be due to the lack of confidence the people have in this country and therefore due to fear, fear of losing employment, fear of refinancing, fear of diminishing home values, fear of layoffs and lack of credit are all reasons that people’s wallets have been hiding.

So what should you do? Spend or Save?

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Times are bad for banks and as discussed in our previous featured articles, the banking system seems to be the reason the economy keeps sinking. Many investors are worried about the market and therefore choose to not invest and the cycle keeps going and going, sinking deeper daily. These bad events with the lack of confidence the people have in the economy and team Obama cuts consumer spending tremendously. Is consumer spending all we have to worry about? or is the banking system failing the next door leading to another great depression (prolonged recession).

Based on my other article about which banks are likely to fail, we discussed who is likely to make it through 2009, but we also realized that many may not, two of which are banking giants Citi Bank and Wells Fargo. Both of those banks failing would mean catastrophic losses for this country, so what can the government do? or shouldn’t do?

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Unemployment is expected to reach 10% before it starts going back down.

The housing market seems to not be on track for anything.

The stock market keeps hitting record losses.

So when will all of this go away? How bad is it? The real problem remains around the banking system, not just a bank, but the entire system. I don’t think anyone including the banking CEO’s or the government has any idea of the dept of the problem and there lies the dilemma. Continue Reading