The many different facets of the mortgage market never fail to amaze me at times.  I read a lot of things about this market to stay in touch with what is going on, and the more I dig, the more worrisome it gets.

We must remember that it isn’t just Mr. Average Joe that suffers from this whole fiasco.  Shareholders get the same shaft as everyone else.  There is now way to tweak it up, either.  It is reminiscent of “all the king’s horses, all the king’s men” in this market, and it is no way over yet.

Banks suffer from the mismanagement of their funds.  Unlike Mr. Joe, though, they have the means to print their own money.  They are doing so in the release of more common and preferred shares. This naturally dilutes the dividends paid to investors, and they are not happy campers right now.  The S&P doled out $61.72 billion worth of dividends during the first quarter.  A lot of loot, until you look at the fourth quarter of 2007, when $67.09 billion went to investors.  Let’s look at some figures.

Fifth Third Bancorp needed $2 billion to bail out a regional bank.  KeyCorp needs $1.5 billion.  They will raise this money by issuing more shares.  Already this year, banks have raised more than $60 billion by this method.  Global banks and brokerages have written down nearly $300 billion from poorly made bets in mortgage backed securities and other risky investments. Analysts are looking for this to go much higher than it already is.

Standard & Poor’s senior index analyst Howard Silverblatt had this to say: “The market is now seeing a substantial increase in financial companies issuing common and convertible instruments in an effort to shore up liquidity.  The additional financing gives them immediate breathing room, with the payback being longer term dilution.”  I am thinking that now is not a good time to be long in banking stocks.  The long range effects of all this meltdown is hurting everyone, and I have yet to see a substantial plan to put an end to it.  I begin to wonder if there is.