Barons article says Tangible commons the sign of bank health. What does this mean?

[upi402]

http://online.barrons.com/article/SB123579000831199203.html
A Capital Debate
"...Wall Street, however, is focused on tangible capital, which reflects only common stock. Regulators also may be leaning toward tangible common...."

Clark Howard's site posted this and I was alarmed to see Wells Fargo on the naughty list. What's going on?

[SteppingRazor]

1. It's a question of whether all stocks and securities, taken as a whole...

are reflective of an institution's financial health, or is it just the common stocks? While banks have been insisting that, taken as a whole, their financial assets reflect a reasonably healthy institution, Wall Street has been looking only at common stocks, which, because they have been doing poorly, seem to indicate that banks are in far worse health than they really are -- at least, that's what the banks would say.

[Veritas_et_Aequitas]

2. I think this article should answer your initial question:

http://baselinescenario.com/2009/02/24/tangible-common-equity-for-beginners/

[upi402]

3. That helped

Thanks! Still in all, I don't feel warm and fuzzy -looking out.

[HamdenRice]

5. What a great article! doing the bailout in preferred shares is hurting the banks more than helping

It's yet another article showing we need to bite the bullet and nationalize the banks by taking common stock, not preferred stock. If we had bailed out with common, the article is implying, much of the big bank financial crisis could be over.

[anigbrowl]

4. Up to now the government has been taking preferred stock

which does not allow voting (to alleviate fears of nationalization) but which does pay a dividend (to alleviate fears of taxpayers' money just vanishing as the market wobbles). Basically Wall Street (or at least Barrons, an important voice thereon) is warming up to the idea of nationalization.