This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Will Blanche Lincoln Kill Bank Stocks?

NEW YORK ( TheStreet) -- Bank investors are freaking out, and with good reason: The companies they own have gotten hammered recently and may see up to 36% in additional downside in the weeks ahead, according to one estimate.

The bad news? Financial reform may slash revenue by at least 25%, profits by as much as 75% and force the industry to raise $200 billion in fresh capital. The good news? Things may not turn out quite as bad as those dire, doomsday predictions. The recovery will offset some of the downside, the capital burden may not be placed on shareholders, and bank stocks have already taken a big hit.

>>Bull or Bear? Vote in Our Poll

The scary news? The outcome depends on the whims of lawmakers.

The Bill

The financial reform bill was approved by the Senate late Thursday after months of back-room negotiations and weeks of public debate. Sen. Chris Dodd (D., Conn.) first unveiled it in mid-March, but it went through several iterations since then. In the past few days alone, lawmakers added a significant amendment regarding derivatives, doubted its prospects, touted its prospects, tried to water it down, ridiculed the guy with the hose, then went back to square one.

After all that, Senate Majority Leader Harry Reid (D., Nev.) couldn't even get his colleagues to vote "yes" on holding a vote until Thursday afternoon, when 60 senators voted to move the bill forward after the cloture vote failed by a margin of 57-42 on Wednesday. The Senate bill will now be reconciled with the House version, which was approved in December.

Meanwhile, the financial industry and its major corporate clients have been sweating bricks. In their view, the derivatives measure is perhaps the single most important item in the reform package. The direct and indirect costs to the industry and the economy could be huge, depending on whether that amendment, sponsored by Sen. Blanche Lincoln (D., Ark.) is adopted, and how it is interpreted. They are so significant, in fact, that even the estimates outlined so far are ballpark guesses at best.
Blanche Lincoln
Sen. Blanche Lincoln, Democrat from Arkansas.

A line item in a report on Thursday by Rochdale Securities analyst Richard Bove outlining all the costs related to financial reform may have captured it best: "For no definable reason, I am setting aside another $20 billion in possible losses due to the unknown."
1 of 4

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
BAC $14.02 -0.78%
BCS $9.30 -1.60%
C $44.26 -0.90%
DB $16.62 -3.40%
CS $14.09 -1.30%


Chart of I:DJI
DOW 17,639.45 -11.81 -0.07%
S&P 500 2,047.81 -3.31 -0.16%
NASDAQ 4,714.1670 -11.4720 -0.24%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs