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Bank Stocks Take a Dive


Without bailout, a crisis of confidence.

Bank stocks took a hit Monday after the House of Representatives rejected a $700 billion bailout plan, creating a crisis of confidence.

But stock futures rose Tuesday after lawmakers said they will work to pass the bill, possibly later this week.

Both presidential candidates urged the House to pass the rescue package, but no action will be taken before Thursday. Democratic candidate Barack Obama said the bill "will get done." John McCain, his Republican opponent, urged members of the House to "go back to the drawing board" and draft an acceptable compromise.

"We don't intend to leave here without the job being done," said Democratic Senator Christopher Dodd of Connecticut. Minyanville's Why Wall Street Will Never Be the Same

Republicans proposed doubling the limit on FDIC insurance to $200,000.

After Monday's 228-205 vote in the House of Representatives, Treasury Secretary Henry Paulson said failure to pass the measure would create a credit crunch and make it more difficult for American businesses and families to secure loans.

"We need to work as quickly as possible," Paulson said. "We need to get something done."

Officials in a range of industries, including software, pharmaceuticals and office supplies, said failure to pass the bank bailout plan would put the entire economy at risk.

The Dow Jones Industrial Average fell 777 points Monday and has lost about 10% in September and the Nasdaq Composite Index is off about 16%. The S&P 500 is down about 14%.

Regional banks were especially hard hit in Monday's sell-off. Sovereign Bancorp (SOV) fell about 72% and National City (NCC) lost about 63% of its value. Fifth Third (TFIB) fell about 44%. First Fed Financial (FED) lost about 25%. KeyCorp (KEY) fell about 33%.

Sovereign, based in Pennsylvania, has about 750 branches in the Northeast and about $79 billion in assets. National City, based in Ohio, has about 1,300 branches in the Midwest and Florida. In a statement released Monday, National City said it was better capitalized than Wachovia and Washington Mutual and had less exposure to bad mortgages. Fifth Third has about 1,300 branches in the East. First Fed Financial has about 30 branches in Southern California. KeyCorp has about 985 branches in 13 states.

Major banks also suffered losses. Bank of America (BAC) fell about 17.5%, while JPMorgan Chase (JPM) lost about 15%. Earlier, JPMorgan acquired the assets of Washington Mutual after the government shut the thrift down.

On Monday, Citigroup (C) announced that it would buy the banking operations of Wachovia (WB) in a deal set up by Uncle Sam to ensure "financial and economic stability."

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No positions in stocks mentioned.
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