KeyCorp Raising $1.5 Billion in Capital, Slashing Dividend 50%

KeyCorp announced it was raising $1.5 billion in new equity and slashing its dividend by 50% to shore up its balance sheet as it will be forced to take a $1 billion charge to earnings.  Providing further evidence that banks have concocted a myriad of inventive ways to lose money, KeyCorp's $1 billion loss is not the result of write-downs related to mortgages or soured construction loans.  No, these losses are the result of KeyCorp's choice to use questionable accounting related to the tax treatment of its leveraged lease portfolio.  A federal court ruled against KeyCorp's tax treatment and now it must change their method of accounting for its entire leveraged lease portfolio. 

Warren Buffett has a famous quote that Wannabes, myself included, reference when markets are unraveling.  The phrase is slightly altered every time, yet the message remains crystal clear and portentous:  "When the tide goes out, we find out who's been swimming naked."  Everyone's a genius in a bull market.  When the market falls apart, we start to discover what was hidden for years by the rising tide of bullishness.  The easy credit of the last few years attracted a significant amount of skinny dipping.  Now that the bullish tide has receded, we're left with the ugly truth.