U.S. bank stocks plummet...?

Question

I noticed that all U.S banks stocks are going down everyday.. What would happen after they reach like 0 value... WM , C, BAC, WFC...

Will shareholders lose their principal..??????????????

Answer 1

Yes, but it won't reach zero unless the bank goes bankrupt.  If the bank is still functioning alright and the stock price goes down really low, another bank will just buy up all the stock and take it over.

Answer 2

yes they will

Answer 3

can't happen.  they have the ability to use the discount window.  if any of them fell another 50%, they would just go and use 2.25% federal loans to call all existing debt.  while it won't de-lever them, it would save them billions in interest payments.  look at lehman, which is estimated to be levered at about 25x, and in the most trouble.  they have more than $750 billion in outstanding debt (seriously!).  let's assume that their average coupon on that is a fairly low 5%.  That means that they make $37.5 billion in interest payments every year.  if they did this, then they could save themselves more than $20 billion/year.

plus, then the fed would be forced to give them a bear-sterns like helping hand, and get acquired by another investment bank.

but if LEH or any of the smaller ones fall another 50%, there should be plenty of offers for takeovers/unders.

Answer 4

The banks stock are not the only ones that are dropping in price,

One thing that people shouldn't do is to listen to the uneducated news media who is and has been preaching doom and gloom especially with bank stocks.

The banks/financial institutions are basically strong banks. (WM is not a bank), they have sufficient capital and unless they have outside sources telling people to pull their money, like in the case of IndyMac, investors should be fine in the long run.

If a stock goes to zero, a shareholder could loose the investment BUT we have had one bank have severe problems (thanks to Congressman Schummer NY), but other than that we should weather out the market.