Anxiety about the cost of raising money triggered some serious selling that ended with blood running down the Street. It was the worst day for banks since July 2002.
Fannie Mae and Freddie Mac dropped sharply Wednesday as some investors worried that the two pillars of the U.S. housing market will need to raise billions of dollars in additional capital through stock sales, diluting the holdings of current investors.
However the concern might be unfounded. “Fannie and Freddie are not going under,” analyst Dick Bove tells Fast Money. “There’s plenty of money available for them through the federal home loan bank system if that’s necessary.”
Meanwhile, Merrill Lynch shares fell more than 9 percent, after Fitch Ratings said it may cut the U.S. investment bank's debt rating, given expected ongoing write-downs and diminished prospects for earnings.
"There is uncertainty about financials as we go into earnings season about what write-offs and capital raising might be needed," says Bucky Hellwig, senior vice president at Morgan Asset Management, in Birmingham, Alabama.
Analyst Dick Bove paints a very different picture. He's extremely positive about the US banking system. “The banking industry in the US is both strong and healthy,” Bove tells Dylan Ratigan. “All of the fear being driven through the market because of the huge loan losses aren’t relevant because they’re non-cash charges.”
