What's Wrong With Bank Stocks

Sure, State Street had horrible earnings and is getting taken out to the woodshed.  And yes, Meredith Whitney is bashing bank stocks again and who has been more right than her about the sector in the past year?  Not to be outdone, another two-bit, "me too" analyst from FBR is also out with some negative comments about the sector, but I can't imagine anyone cares what he has to say.  Because really, if you are choosing today as the day to inform the public that bank dividends might not be safe, and that Bank of America might need more capital, after it's already been bailed out by the government and is trading at $5, and you didn't even see that one coming, well, then anything negative you have to say about the sector should be deemed as bullish.  So what's the real story here?  Why are options traders paying through the nose to buy winger puts in every American bank stock on inauguration day?  The answer lies across the pond. 

Royal Bank of Scotland down 70%. Today.  Lloyds down 57%. Today.  Barclays, who snubbed its nose at government money a few short months ago down 40%. Today.  The UK's largest bank stocks are headed to zero as the market is anticipating a full fledged bailout of the banking sector.  I return to the same question that I asked the other day:  What, if anything, is bank equity really worth?  I don't know the answer.  I don't think anyone does yet.  But with the largest bank stocks trading like call options, investors are taking a good hard look around at the remaining banking landscape and asking why every bank stock shouldn't be trading in the single digits.  If it's still a $50 stock, look out below.