Obama Wins, Financials Dive

It's carnage out there today, especially if you're an investor in banks and financial companies.

Bank of America  (NYSE: BAC  ) is off close to 6%. Citigroup  (NYSE: C  ) and JPMorgan Chase (NYSE: JPM  ) are both down almost 5%. Goldman Sachs  (NYSE: GS  ) is down more than 5%. Morgan Stanley  (NYSE: MS  ) is practically crashing as it's fallen more than 7%.

It's no coincidence that this battering follows closely on the heels of President Obama's reelection. The president has been widely seen as an enemy of Wall Street, banks, and the wealthy folk that sit atop both. It's not all perception -- at least, if we follow the money. As Amanda Alix pointed out, the financial vote from Wall Street went heavily to Mitt Romney.

There may truly be some meat to the concerns over Obama. Dodd-Frank is still slowly but surely coming to life, and key provisions like the Volcker Rule have yet to put into action. Leniency on the final versions of these rules is less likely to be found in an Obama administration. Further, litigation against banks has been raging, and a Democratic executive branch is far more likely to turn the screws further. And that's not to mention the perception and PR problems that come from a president that likes to nod at Wall Street and talk about "reckless behavior and unchecked excess." 

Of course, there may be less to fear than meets the eye. While Obama has talked tough on banks, in the big picture, he still supported the nursing-back-to life process that started under his predecessor and will be in favor of an easy-money Federal Reserve chief (even if Ben Bernanke steps down). And with the economy (slowly) on the mend and banks now sporting much-improved balance sheets, the improvements in their overall businesses may make what the government's doing seem more like an annoying sideline than a serious threat.

The bigger question may be whether Obama is even the banks' biggest threat in the government. For fans of financials it was hard to miss the victory that Elizabeth Warren notched over Scott Brown to grab a seat in the Senate. The former Harvard law professor and driving force behind the the Consumer Financial Protection Bureau is no friend to Wall Street and is likely headed straight for a spot on the Senate Banking Committee. Following the election, online site Gather ran a headline: "Elizabeth Warren: Why Wall Street Should be Scared."

In terms of "playing" these election developments though, the knee-jerk selling seems overdone. The banks may have found more leniency under Romney, but is that worth $5 billion to $6 billion on the value of Bank of America? And let's be honest -- an Obama victory was expected, so much of the impact should have already been priced in. Not to mention the fact that Obama and Liz Warren can have any view they'd like, but if nothing can get done in a deadlocked Congress, it won't mean much. 

Useful takeaways? Banks fared well during Obama's first term, not that past results are a promise of future performance. Perhaps more importantly, betting on stock market impacts from a presidential election is a fool's game.

Want to read about what will really impact a Bank of America investment thesis? Check out our in-depth company report on Bank of America. The report details Bank of America's prospects, including three reasons to buy and three reasons to sell. Just click here to get access.


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  • Report this Comment On November 07, 2012, at 2:47 PM, buffalonate wrote:

    I think the financials are dipping because of the bad news out of Europe.

  • Report this Comment On November 07, 2012, at 5:33 PM, slappyj wrote:

    Stocks were actually up this morning...until the news from Germany. People keep blaming Obama for the drop...lol

  • Report this Comment On November 07, 2012, at 5:35 PM, eddietheinvestor wrote:

    The banks were brought back to life and revived by President Bush. I realize that the Motley Fool is liberal, but still give Bush some credit. It's lame to simply refer to him as "his predecessor."

  • Report this Comment On November 07, 2012, at 5:36 PM, s73v3r wrote:

    Don't forget the fact that we still have a highly divided and extremely partisan Congress, meaning that uncertainty about what is going to happen soon is still pretty high.

  • Report this Comment On November 07, 2012, at 5:48 PM, NOTvuffett wrote:

    Oh goody, Elizabeth Warren aka 'faux-cohauntus' will sort everything out, lol.

  • Report this Comment On November 07, 2012, at 5:49 PM, simpdon wrote:

    Not only did the market react to the bad news from Germany, austerity seems to be not working out so well, and not from Obama's win but in case you have forgotten the bankers and the investment community caused a financial crisis that cost the nation 7 trillion dollars in lost capital, threw 25 million people out of work and millions of families out of their homes. Not only that but they proved without question that the financial markets can't self-regulate. It is not unreasonable to throw a few thousand of them in jail and to subject the rest to at least enough regulation to make sure that this never happens again.

  • Report this Comment On November 07, 2012, at 5:50 PM, DanNewton99 wrote:

    Excellent! I used this as an opportunity to buy.

  • Report this Comment On November 07, 2012, at 5:59 PM, rbraseth wrote:

    Forever a hustle. I'm done. With few exceptions, there is always a sales pitch at the end of a decent analysis piece. Whatever happened to just making three newsletters great. Now there are eight or whatever. Ease up guys. What happened to the roots you claimed you would never give up. Now it's gimmicks just like the rest of the snake oil sales people. You might start off by making a straight understandable comparison with the S&P you measure yourself against. That is, with the only fund that has managed to beat the S&P.

  • Report this Comment On November 07, 2012, at 5:59 PM, simpdon wrote:

    "The banks were brought back to life and revived by President Bush."

    Which was the least that they could do considering that it was the Bush administration's failure to regulate the financial industry that lead to the Great Financial crisis and the resulting recession. A legacy of incompetence that is almost without equal in the country's history, right up there with the same administration's incompetence in preventing terrorist's attacks and in starting wars by mistake.

  • Report this Comment On November 07, 2012, at 6:02 PM, marimbarick wrote:

    It's been proven that Democrats actually help the financial situation in Canada. They are progressive and that helps everyone's pocket book. The previous administration spent heavily on war and bankrupted America.

  • Report this Comment On November 07, 2012, at 6:07 PM, rjk37 wrote:

    Give me a break! The Dems forced banks to lend to people who had no business getting home loans for buying a house. That house of cards collapsed and of course, it was Bush's fault!

  • Report this Comment On November 07, 2012, at 6:17 PM, nolanl66 wrote:

    I sold because of the election results an will continue to sell. All our funds that Obama had to spend of our money is over this year. The value of dollar will continue to fall! More down side than upside: An ounce of prevention is worth a pound of cure.

  • Report this Comment On November 07, 2012, at 6:18 PM, ryangugino wrote:

    obviously this article has been written by a republican...

  • Report this Comment On November 07, 2012, at 6:35 PM, pauldelang wrote:

    Any proper politician who cares for his people will not let scoundrels get away with fraud and subterfuge. And that is what Wall street was doing before the house of cards came crashing down. Obama is not against the banks making money legitimately, he is against the banks making mega profits with and from shady "financial assets" and classifying it as top grade to fool honest hardworking people into buying them only to find later they have been fooled. Obama and Liz are all for honesty and integrity in the financial sector and if the financial sector can't behave properly then it must be done for them.

    It's like the beauty industry advertizing the impression that their mascara product gave the particular model those fantastic lashes when in actual fact the model is wearing false lashes and the photo has been photoshopped as well. But this is not disclosed in the ads. Dishonesty should not be tolerated and crooks should be behind bars.

  • Report this Comment On November 07, 2012, at 6:38 PM, CincyWalrus wrote:

    I see the election as a "staus quo" event. Without control of both branches of Congress, it will be difficult for President Obama to force his policies on anyone. The biggest problem will be increased regulation of all industries which will tend to make American companies more inefficient and therefore more vulnerable to international competition.

  • Report this Comment On November 07, 2012, at 6:39 PM, SueGen wrote:

    If the market is at all responding to the Obama win, well, the market is totally irrational. The market went just swimmingly for the last 4 years, why not continue that course?

  • Report this Comment On November 07, 2012, at 6:54 PM, newageinvestor wrote:

    This is about Europe not Obama. And who crashed the economy again? Not Obama. Wall St. banks did. And nobody went to jail for ruining millions of people's lives. They deserve whatever they get. Obama didn't do anything to jail anyone, and he should have.

  • Report this Comment On November 07, 2012, at 6:59 PM, zdowman wrote:

    I have only cash, sold all in preparation for this election with that the belief that no one could beat the minority vote. In response to pauldelang i would like to share in 1998 Barney Frank went to company managed by my nephew and told this company they had to raise the number of loans to people who could not afford them from the ,then current 35% to a new 50%. If they did not comply they were threatened with never ending IRS audits as well as the FDIC and any other government agency that could kill their business.My nephew told me there was no way they could maintain at this level and behold he was correct. So pauldelang tell me how you run a business when the government tells you to through 50% of your money in the toilet. How did Bush make Barney and friends destroy the financial community.

  • Report this Comment On November 07, 2012, at 7:02 PM, eldetorre wrote:

    "The Dems forced banks to lend to people who had no business getting home loans for buying a house."

    The election is over and you still insist on propagating these myths?

    The dems and republican in a bipartisan matter relaxed requirements. They did not force banks to do this, nor force them to make "liar" low doc no doc loans. Nor did it force them to repackage these as aaa rated debt.

  • Report this Comment On November 07, 2012, at 7:06 PM, bugsy98 wrote:

    finacial regulation protects consumers and investors. look at the near colapse brought on by the years of no regulation during the Bush administration.

  • Report this Comment On November 07, 2012, at 7:19 PM, zdowman wrote:

    I take it my Liberals you never heard of the Community Reinvestment Act which told the banks to give bad loans and has been modified numerous time with Daily inspections if necessary. To be lenient on the small banks and harder on the large ones. I know I'm still spreading lies, P.S Carter started this. That should give you the warm fuzzes all over.

  • Report this Comment On November 07, 2012, at 7:33 PM, CER4040 wrote:

    @newageinvestor

    It's up to the SEC to determine if the bankers did anything illegal not Obama.

  • Report this Comment On November 07, 2012, at 7:39 PM, BentMike wrote:

    I need straight shooting from corporate filings. TWNGTHWTOO (That Was Not Going To Happen With The Other Outcome).

    I need an SEC that can do real work TWNGTHWTOO.

    I need never to see rolled up trash sold as good mortgages TWNGTHWTOO.

    I need flash crashes and related structural problems to be solved TWNGTHWTOO.

    I need whatever the next brilliant financial idea is

    to be headed off before it crashes TWNGTHWTOO.

    I would like to see IPOs run much better TWNGTHWTOO.

    I need a Supreme Court that will take some of the money out of campaigns TWNGTHWTOO.

    I need pre-existing health conditions to have no bearing on my ability to maintain health insuranve TWNGTHWTOO.

    I need the whole health care system to become sensible TWNGTHWTOO.

    I really want some of my friends to be able to marry and visit each other in the hospital TWNGTHWTOO.

    I want to practice my Buddhist beliefs without fear or interference TWNGTHWTOO.

    Not saying I will get any of what I want, but for sure the chances are better now.

    I am pretty sure if I keep reading my Ben Graham book and trying to follow it that I can survive whatever, but some transparency regarding investments would be mighty nice.

  • Report this Comment On November 07, 2012, at 7:41 PM, Jarmbru wrote:

    The stock market went to hell under the last Republican administration and had a GREAT run under the first Obama administration. I lost a bunch in the market under Bush, I made a bunch under Obama. Duh. This is another good buying opportunity. Buy on the market's fear, sell on it's greed.

  • Report this Comment On November 07, 2012, at 7:52 PM, eldetorre wrote:

    Zdowman

    Unlike you we "liberals" actually know more about the Community Reinvestment Act than you do!

    http://thinkprogress.org/economy/2012/03/28/453978/fed-study...

    "Most high-risk subprime loans were originated by non-bank lenders not subject to CRA, and the loans were usually issued to middle- and high-income borrowers that did not qualify for CRA."

  • Report this Comment On November 07, 2012, at 8:37 PM, healthcarepro wrote:

    Rather than reacting to the financials today, why not get ready for a buying opportunity. Not because of politics but rather a company available at "sale" prices.

    It's funny that a letter to our local paper today claimed that wallstreet loves Obama. Who knew?

    I'm hanging on to my Citibank position having bought it when it was too big to fail and on sale for $1.00 per share.

  • Report this Comment On November 07, 2012, at 8:44 PM, DanFPilot wrote:

    I have no love of banks, I do not have debt nor will I ever use debt. Debt is bondage. But I would like to know of anyone who had a gun put to their head and forced to take out a loan they could not afford to repay. The financial crisis was caused by greedy, ignorant people from all income levels taking out loans they couldn't afford and then default. Or even worse, walked away from loans they could afford but are upside down. I'm not sure how being upside down on a house justifies a 'strategic default', Personally, I'm glad the housing market corrected. Got a killer house at a killer price. Paid cash so got an even better deal and didn't have to beg the banks for a loan. Did good in stocks too. But low, sell high!! I'll be buying in. As for the market, it will rebound. Obama is a horrible president but the market is ultimately driven by fundamentals.

  • Report this Comment On November 07, 2012, at 8:49 PM, adahling wrote:

    With no bankers going to prison during Obama's administration is proof that Obama is in favor of protecting bankers. The Bankers are the ones that caused the unemployment and then got bailed out with our tax money.

    Bush was too busy looking for non-existent weapons in Iraq to notice what was hapenning at home.

    adahling

  • Report this Comment On November 07, 2012, at 8:55 PM, JMB1966 wrote:

    It seems to me that we are all here to increase our net worth, and while I consider myself a fiscal conservative, I applaud this addition to the Senate. I have watched as each hit that the market has taken, someone and not me, has walked away with the money that I gave them so that they could grow their businesses and I could prosper. If there is someone in the Senate that will call a thief a thief, I am all for it.

  • Report this Comment On November 07, 2012, at 9:10 PM, Tiingall wrote:

    If Wall Street was voting for Romney then thank goodness he did not get in. Since they are apparently such close palls, we can only assume that Romney is a criminal too. We don't need a criminal in the white house aiding and abetting the criminals in the banks and wall street.

    A couple of months back we had HSBC execs in a Senate Inquiry which revealed they were laundering Mexican Drug money; that means they are aiding and abetting the death of tens of thousands of people each year.

    They were also falsifying legal documents, in order to create a means to make money selling US currency to people and organisations that fund terrorism around the world.

    This is the same organisation that had over 700 staff in the USA in a special section flogging sub-price loans and subsequent worthless securities and thereby helped precipitate the present world financial crisis and the problems still being experienced in Europe, and elsewhere.

    I've very pleased to read these criminals are facing substantial legal action.

    What I'm not pleased about is that we'll be paying for the financial consequences, not the criminals who perpetrated the disaster. They are still getting their bonuses, pensions, great salaries etc, while we suffer through low returns on investments, struggling businesses, low bank interest, higher bank fees and lower services.

    Where is the personal responsibility and accountability that we must shoulder when we borrow other depositors' funds from the bank vault to invest in our businesses? The bankers can take depositors funds and "invest" in scam schemes they create for the benefit of their personal greed; and are not responsible or accountable for the consequences. Instead they put up bank fees, lower interest on bank deposits to us and thereby recreate our money they stole or vaporised in their vaults.

    How cum it's OK for them to do that? What stupid laws give them that right and that protection? If that's a law and consequence which Romney supports, then thank goodness he did not get the job.

    Earlier this week HSBC announced it had set aside 800 million pounds as a contingency for expected further fines and penalties for their corporate criminality. We'll be paying that too. Not the decision makers in HSBC who lined their pockets as a result of their fraudulent management decisions. All of us who need to use the banks' monopolistic services will pay so they can keep running their scams.

    Let's hope Obama and his people can crucify them. So honest hard working people who actually create useful goods and services can again benefit from the economy. The sort of well run and productive businesses where Fools like to invest.

    Don't encourage the criminals in the banks by investing with them. Send them a message; we don't want a share of the dirty and blood stained money created by the death and human suffering they create and facilitate; and which they claim is doing legitimate banking business.

  • Report this Comment On November 07, 2012, at 9:13 PM, molesto wrote:

    I DON´T KNOW WHO R WORST: THE FINANCIAL COMUNITY OR THE POLITICIANS. LETS DECLARE A TIE. SCUMBAG ONES SCUMBAG THE OTHERS. INMORALS.

  • Report this Comment On November 07, 2012, at 10:16 PM, EBerg13 wrote:

    Perhaps stocks took a dive because investors fear another meltdown over the so-called debt ceiling (better to call it "default on our payments") sending world markets reeling again.

    As for me, until there is some regulation of the industry I am staying clear of financial stocks lest I find myself holding paper on a firm that greeded itself out of existance.

  • Report this Comment On November 07, 2012, at 10:21 PM, kevcl747 wrote:

    Maybe the Fool could do an honest evaluation of the 08 meltdown someday. I see a lot of uninformed opinions on the site. Start with ez money, repeal of Glas Stegal and deregulation of derivatives and boom ! I buy soccer balls for Costa Rican kids and then they over inflate the ball and kick it around in the street and guess what happens ! Only an idiot would try to re inflate the ball without patching it but very hard to do with a soccer ball ! Good luck ben & barry !

  • Report this Comment On November 07, 2012, at 10:48 PM, Chontichajim wrote:

    The Obama odds of winning in the last months never dropped below 75%, and that was only shortly after the first debate returning to more like 85% in the last weeks. Individuals may wish to believe in fairy tales but the market should have had his victory built in. Many people may want to take their capital gains before the end of the year, but that just makes it a good time to buy bargains.

    I am glad to have the first stock sale since last June. Blaming todays decline on an election that occured as expected (except for some Senate seats) is weaker than using the regular "Europe in shambles" reason.

  • Report this Comment On November 08, 2012, at 5:58 AM, RightD wrote:

    Fiscal cliff fears, slow down in Germany's economy and negative vibes from Mario Draghi added to bearish sentiment and are downers for stocks.

    In a good agreement with the forecast:

    http://alturl.com/nz6b6

  • Report this Comment On November 08, 2012, at 7:05 AM, ladybug57 wrote:

    Excuse me, but the government and Clinton caused the banking, real estate problem. The government pushed for all Americans to own a home.

  • Report this Comment On November 08, 2012, at 7:59 AM, Darwood11 wrote:

    It was a pretty broad selloff. My only winners for the day were NFLX, GLD, ITRN and several bond funds. Average change for the portfolio was -1.26%

  • Report this Comment On November 08, 2012, at 1:06 PM, Cookies2011 wrote:

    Obama keeps spending and spending in which we have no money.....so he is going to tax everyone. I think he is still guilty of not helping our duplomats in Libya.. I hope God sees him as what he is!!!

  • Report this Comment On November 08, 2012, at 1:10 PM, Cookies2011 wrote:

    Did you know Obama stole money when he was in college. He also skip alot of classes at Havard and the professor never said any thing!!! Boy, I got to see what happens in his second term in office.

  • Report this Comment On November 08, 2012, at 3:30 PM, Foreeverlong wrote:

    Wall Street does not seem to trust the Obama Administration. They don't trust the regulatory environment, the tax environment, ObamaCare and the business climate etc. I believe that the DJIA sginificantly going down the day after the election, was not a coincidence or related to Europe. It was a vote of "no confidence" by Wall Street. Steve Forbes has said that he believes that Obama's re-election creates a certainty that we will fall into another recession. As you know, Wall Street does not like uncertainty.

  • Report this Comment On November 08, 2012, at 3:42 PM, spinindog wrote:

    Obama doesn't hate the banks. He just uses them as a tool to give his ignorant fans something to hate.

    He is well aware that the great recession was caused by people not paying back what they borrowed from the banks.

  • Report this Comment On November 08, 2012, at 5:24 PM, 1pOwedyank wrote:

    eldetorre

    You want to read your garbage based mostly on opinion, or an article with verifiable facts?

    http://mises.org/daily/2963

  • Report this Comment On November 08, 2012, at 7:48 PM, hank321 wrote:

    I know folks who are just liquidating assets so they can move them out of harm's way.

    In some cases this means moving from the bay area to Seattle (no WA state income tax, and not likely to be any---all higher tax ballot measures continue to lose).

    In other cases this means moving out of cities into the friendlier RED counties.

    In some cases it means leaving the US permananetly. I know affluent professional indians and chinese who have returned to their homelands because there is better opportunity for productive people there.

    In the US currently opportunities seem to be reserved for illegal uneducated immigrants from Mexico---their legal voting cousins in the US are putting the screws to Obama to payoff in return for the votes. The price for hispanic support---12 million illegals need amnesty and a voting card--to help destroy the GOP in Arizona and Texas.

    For a while, investing in Australia or Brazil may be a better bet than investing closer to home.

  • Report this Comment On November 08, 2012, at 8:13 PM, hank321 wrote:

    Bill Clinton's appointees, Sommers, Rubin, did more in 1998 to create the eventual crisis of 2007 than did any bank. they allowed credit derivatives to remain opaque. They had help from Greenspan, too. They set the stage for the disaster. Many feel they did it in ignorance,...not intentionally. Whatever.

    the ratings agencies might have stopped this,...but did not. i doubt they failed intentionally,...but through ignorance, again. If they is evidence otherwise, I'll listen to it---but I have not seen it,...just empty accusations so far, after 4 years.

    By the point that the banks started to understand how much risk there actually was, they were in so deep, they could not back out quickly, and just needed to begin quietly to hedge like mad (GSCO-JPM)---which the smarter ones did. The dumber ones went under (Lehman)---or were merged out (Merrill).

    As usual, the Federal response to this is too OVER React. The response so far has been too heavy handed,...as is the usual Federal response to any problem. A modest deft touch in 1998 could have stopped this before it started. Now, they want to use a sledgehammer to drive a tack.

    Typical.

  • Report this Comment On November 08, 2012, at 8:57 PM, Cassandrabelle wrote:

    The steady pumping of QE under Obama has been very good to the markets, so don't blame this overdue correction on anything but the real and present macro uncertainty of China, the EU fiasco, and the Fiscal Cliff--to name just a few.

  • Report this Comment On November 09, 2012, at 5:14 PM, nichole26000 wrote:

    Economy on the mend? I don't know where you live, but where I live, it is not on the mend. Just because you write it, doesn't make it so.

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