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JJC:   After the events of this weekend, it's no surprise that the financials got carpet-bombed today... With the few financial stocks, Washington Mutual actually getting new... can you believe that this guy is still the CEO... I mean, the Wall of Shame, does it mean nothing to this government?... This man (pointing to Kerry Killinger, CEO of WM) has systematically presided over one of the greatest meltdowns in history, but nobody seems to care, except Cramer... I feel like I come out here every day and just repeat the same old, but correct, party line, that you can't own the financials or the homebuilders...

Over the collapse of a bank that I have despised and trashed to you repeatedly, IndyMac (IMB), on Friday... Which by the way, is leaving the FDIC, our banking safety net with far less money than I think it will need... And with Fannie Mae (FNM) and Freddie Mac (FRE) suddenly about to be owned, perhaps, by us, through a federal government bailout... We need to figure out what this means for you as a bank depositor and possibly a bank share holder, or a homeowner, or a potential one...

I want to make this clear... I think what the government is doing for Fannie and Freddie, while great for anyone who's in the market for a mortgage, is pretty much irrelevant to the banking stock sector... See, banks trade primarily on earnings and dividends... And right now, few of them have any of the former, so they're cutting or eliminating the latter... In fact, most banks have gigantic losses because they lent money to home buyers that they will never see back again... They have what's known as non-performing assets, which are wiping out whatever gains they might have...

But I don't want to be the Herald of purely bad news here... See, there is a silver lining... And it's this, and I want to be real clear...

Your deposits are safe...

I don't think you have to go make a run on your local bank... And with the infusion of cash into Fannie and Freddie, it may have just gotten a little easier for you to sell your house... Those organizations matter... I believe it's the stocks of the banks and the stocks of the homebuilders that you do have to worry about...

But I don't want you to fret about a second great depression... Nevertheless, when it comes to those stocks, the example of IndyMac, and I think there will be many, many more IndyMacs and bigger IndyMacs coming soon, that should be enough to warn you away from these stocks... Can you believe that this reckless beyond belief lender, IndyMac, actually criticized me a few months ago on their conference call... Telling us that people will never walk away from homes, they're underwater it... Like Cramer says they would... It takes someone who used to work at Countrywide, now the acknowledged joke of the industry, and a Bank of America division, to boot, to make such a bold, ludicrous decision... And that was the case of Michael Perry, who was IndyMac's CEO... Was... What you need to know is that I don't believe anything has happened that was remotely positive for the banking industry yet... All we keep getting are blueprints and frameworks for equity destruction... As the bad loans from 4 million home buyers continue their epic, Shermanesque, march to a sea, where I expect every bank but Hudson City Bancorp (HCBK) to close on Friday, under its own name, and return Monday with the word "federal" in the title... And the equity, that's the value of the stock, totally wiped out... Of course, IndyMac, the equity had been reduced to almost nothing anyway... I think we have to use that as a tell all for other banks... Here's the new rule in Cramerica... If a bank stock goes below $5, it becomes a candidate for the IndyMac process... If you own one of them, it's not too late to sell... But I'm convinced that sooner or later it will be... view that $5 price bench mark as running on empty, and you ain't getting to a gas station with that bank in you tank...

There most likely can't be a bounce back, and part because what you'll probably see next is Fannie and Freddie taking over the bad part of a bank's portfolio... That is what I suggest to you, Mr. Paulson, if you want to try to figure out what to do next... And the good part being bought by anyone solvent enough to pay for it... Perhaps a Wells Fargo (WFC), JPMorgan (JPM), or a US Bancorp (USB)... Well, it's not yet clear who the buyer is going to be... I hate to come out here every night and say avoid, avoid, avoid... I hate to hit this button endlessly, believe me... Sell, sell, sell... But what's the sense of trying to make money for you with good ideas if you put your money in these nare-do-well banks... And it gets wiped out... Good ideas can take care of themselves... I think you need to focus on controlling you losses, capital preservation... To avoid this... Wall Street jibberish for trying as hard as you can to not lose money... If you don't do that, it doesn't matter how many winners we pick, the losers will likely wipe out our gains, and then some...

Controlling and avoiding losses should always be your first priority... And right now I think that means giving the banks and homebuilders a very wide berth... I don't think you have to worry about your deposits... I'm going to reiterate that because I don't want to accidentally cause a bank run to any of the banks I've mentioned... Your money is fine... Now let's be careful, because people have misinterpreted before this... The stocks are not fine... Your deposits are fine... And the bank run, look I don't want to be responsible for it and duly hated for it for what I say... I don't want to do any more damage to the system than has already been done by reckless lenders and a complacent federal government... I don't blame Chuck Schumer by the way, for pointing out the obvious about IndyMac... He was the Senator from New York that was fingered this weekend, I mean, Schumer and I, it's not like we're buddies, pals, friends, although, full disclosure, I did donate money to him in the old days when I was at my hedge fund... I don't do that anymore...

But he was not the reason why IndyMac went, had a bank run, for heavens sake, they were... Now, there are degrees of bad within the banks... Downey Financial (DSL), Chorus, FirstFed (FED) and BankUnited (BKUNA), are I think, the worst... The most in danger and may need to be seized, just like IndyMac... The next worse, National City Corporation (NCC), Washington Mutual (WM) and First Horizon (FHN), which will, just, I believe, have to raise capital right now, or be forced to merge later... Or, open up as Nat City Federal... But, whatever the degree, I don't want you owning any of them...

How about these?... Citigroup (C), Wachovia Corp. (WB), Bank of America (BAC)... The market is drawing its own negative conclusions... Lehman Brothers (LEH), Merrill Lynch (MER), not banks...

You know what?... I'm not even going to say anything... You can draw you own conclusions...

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