But this enthusiasm from analysts hasn't helped. The consolidation of this absurdly fragmented industry has been a good thing, leading to enormous cost savings and better management. But some acquirers have clearly gone overboard. Interest-rate developments have been ominous. Rates have been dropping, which is usually good for banks because it reduces their own borrowing costs and boosts the value of their bond portfolios.
Banks make a living by borrowing short and lending long.
The question for investors is whether the Great Bank Massacre is an opportunity to buy or a warning to wait. You'll have to decide for yourself, but many of the bargains certainly appear enticing for long-term investors willing to ride out the storms that are brewing. The market isn't even discriminating between banks with a lot of Asian and Latin American exposure and those with a little. In fact, small banks have been hurt at least as badly as large ones. The Nasdaq bank index, a broad measure of bank stocks traded over the counter, has fallen 15 percent since the start of the year, while the Nasdaq 100 index, a measure of the 100 largest Nasdaq stocks, is up 39 percent.