This is an interesting take because it has yet another call to increase the capitalization of the so-called too big to fail banks. It sound great and 24/7 Wall St. is all in favor of big banks being on solid ground. The ultimate problem is that the big banks are so big that increase their capitalization requirements effectively withdraws too much capital from the economy.  It is without any doubt that you have heard of the calls to break apart the big banks before. You will here those same calls tomorrow and beyond as well.

When you consider that a mere handful of banks have about half of the country’s personal and commercial bank deposits you have a right to be scared. Increasing the capital requirements above the 10% hurdles set by Basel banking standards. Imagine how strong and able these banks would be able to hold up in another recession if their bank capital requirements went from 10% to say 15%.   Now for the bad news if you look at the tally of assets as of the end of 2012. J.P. Morgan Chase & Co. (NYSE: JPM) was about $2.36 trillion in assets and Bank of America Corporation (NYSE: BAC) has $2.2 trillion in assets, with Citigroup Inc. (NYSE: C) behind it at $1.86 trillon and then followed by $1.42 trillion for Wells Fargo & Co. (NYSE: WFC).

These four banks alone have $7.84 trillion in assets. The CIA World Factbook tracks just about all global economies and its final estimate for 2012 GDP was put at $15.66 trillion for 2012. Different regulators have many different means of calculating what they think the capitalization are best and keeping up with the flavor of the day or week is for government accountants and regulators. Still, this asset base for just the four biggest banks is right at half (actually 50.06%) of 2012 GDP on the purchasing power parity calculation preferred by economists.

It is very easy to merely say in a vacuum that the too big to fail banks should just increase their capital to hedge against future bailouts. Various regulators have various means of evaluating capitalization metrics and requirements. The unfortunate outcome is that by forcing banks to hold even more capital will tighten credit even further than it has been. With much of the world back in recession, that puts the U.S. back in recession.

Here is what Mr. Plosser said,

“Today, I will highlight why I think current efforts may not be sufficient and discuss a two-pronged approach to ending the problem of too big to fail. The first aspect of this approach is establishing a framework that permits a large financial institution to, in fact, fail without placing the financial system at risk. Large financial firms, and particularly their creditors, should not be rescued or protected by government guarantees or supports or by regulatory discretion. The second line of defense that I will discuss is to expect all financial firms to maintain sufficient levels of capital to significantly reduce the ex-ante risk of failure. Increased capital requirements can lower the incentive for financial institutions to become systemically important and lower the probability that such firms will fail in the first place.”

There is an admission that these “TBTF” banks would become less systemically important. We have no problem with the notion that 20 of the top 50 banks should be allowed to grow and take assets from the top 4. The question is how you can do it without creating a recession. No one seems to have the stomach to actually break apart these businesses. Merely lifting capital reserve requirements comes with a serious price due to the economies of scale here.

Finally, just imagine breaking all of these big banks up as the ultimate step that many people would like to see. This would be very messy and would likely throw the economy back into a self-imposed recession. At first there would be many layoffs and many immediate hits in the economy. That would likely reverse itself and perhaps in as short as one or two quarters of the year. During that period of chaos, businesses would have limited access to capital again just like in 2008 and 2009 at the same time that individuals would not be able to easily get mortgages and loans. The list of problems can just go on and on even though we agree that the big banks are just too big and too economically important.

It is easy for politicians and regulators to propose more strict and tighter standards. As you can see, the actual path to take is harder to walk down than it is to talk about. If you do not believe that there would not be real problems here, ask yourself why the moves have been so slow even after the financial crisis. Even with the anti-money sentiment that much of the public and their elected officials have today, the powers that be must also believe that the price to pay would be too costly.

Investors also are finding themselves wondering what to do now that the S&P 500 and the Dow Jones Industrial Average keep hitting new record highs. 24/7 Wall St. has gone through literally hundreds of recent research calls from May and the end of April to find the speculative hidden gems in independent research and in Wall Street research that are calling for expected returns way above market.

Analysts are saying that these stocks could rise by 40%, 50% or even 100%. Our list of 13 fresh analyst stock picks calling for upside of 40% to 100% includes the following: Advanced Micro Devices Inc. (NYSE: AMD), Alliance One International Inc. (NYSE: AOI), Atlas Air Worldwide Holdings Inc. (NASDAQ: AAWW), Boulder Brands Inc. (NASDAQ: BDBD), Carbonite Inc. (NASDAQ: CARB), Chimerix, Inc. (NASDAQ: CMRX), Corning Inc. (NYSE: GLW), Gulfport Energy Corp. (NASDAQ: GPOR), Keryx Biopharmaceuticals Inc. (NASDAQ: KERX), LifeLock, Inc. (NYSE: LOCK), Oasis Petroleum Inc. (NYSE: OAS), Pure Cycle Corp. (NASDAQ: PCYO) and Swift Energy Co. (NYSE: SFY).

We have added color or shown how these calls compare to the consensus price targets from Thomson Reuters to keep things in perspective.

Advanced Micro Devices Inc. (NYSE: AMD) has been on a run, and the stock is threatening to break out of a long-term trading range. Wells Fargo recently maintained its $5 to $7 price range and its Outperform rating when it was talking up the lagging processor designer’s price changes. This still implies that AMD could double in price under the best case scenario from around $3.60 now. This may sound crazy to us, and maybe even to you, but AMD’s 52-week high is $7.32, even if the consensus price target is only about $2.85 here.

Alliance One International Inc. (NYSE: AOI) was just featured in a list of small caps from Deutsche Bank to buy. It provides cigarette manufacturers with the leaf tobacco to make their products. Its consensus price target is $6, which represents implied upside of more than 60% from the current share price around $3.70.

Atlas Air Worldwide Holdings Inc. (NASDAQ: AAWW) rose more than 5% at the start of the week to $44 because Barron’s gave it a writeup showing that it could rise 60% from recent prices. The report showed that cutbacks in military-cargo flights and international deliveries have hurt Atlas Air but its upgraded fleet and more growth elsewhere would drive the value and interest. Barron’s quoted a BB&T Capital Markets analyst calling for $60 on the stock, although it is barely above the consensus price target of $58.44, and one analyst still has an official target price much higher.

As part of the condition of a eurozone bailout, Cypriot bank depositors may take a hit of close to 6 billion euros. The move sounds like it will only hit the wealthy, but it is aimed at all deposits to a degree, with a 6.75% “tax” on deposits up to 100,000 euros and a “tax” of 9.9% on deposits above the 100,000 euro balance.

When deposits in banks are taxed as a whole, that is a seizure of assets. One of the excuses we have heard is that this taxes a bunch of Russian depositors. The problem with this logic is that it hurts anyone and everyone in this tiny nation with deposits in their local banks.

European officials have tried emphasize that this is a one-time event and will not be replicated elsewhere in the eurozone. The question to ask is whether you believe it. Another question to ask is how many politicians with left-bent ideas of taxing the wealthy will look at this and think it was a good idea.

It used to be that most Americans and international investors became resentful that a nation as small as Greece could matter so much globally. Cyprus is even smaller, at only about 800,000 inhabitants and an economy of less than 20 billion euros per year. It does have a cloudy bank system that has been used by Russians and other offshore wealthy depositors.

The problem is that this effort is not targeting tax dodgers and offshore depositors. It hits everyone locally in Cyprus. This is an instance when taxation has become theft. Even if the levy gets reduced, it is still nothing short of an asset seizure.

The stock market needed a reason to sell off, and now we have one. S&P futures are down over 12 points and DJIA futures are down close to 75 points.

We are mostly evaluating E*Trade now for new investors who want to evaluate the online brokerage firm on a standalone basis. E*Trade will finally be free to govern itself much more independently if Ken Griffin is not the chief puppet-master. This is of course not an insult to Mr. Griffin, particularly considering that he did save E*Trade at the eleventh hour from the gallows.

You should now no longer expect that any bidder will magically appear with Citadel out of the way. That would be silly. Still, on a long-term basis, E*Trade will now more or less be free to make its own decisions, so long as it does not violate covenants or other existing financial restriction. The company has peeled off more of its old loan portfolio, but this is still the main drag for would-be buyers. Remember the “Take your mortgage with you” gimmick? That and other crazy loans hurt the company, and it is still perceived by some investors as a probable black hole on the balance sheet.

We saw reports that its loan portfolio is down another $3 billion year to date and is said to be down close to 70% from its peak and just over $10 billion. The delinquencies are still lower as well. What is hard to do here is to trust the numbers because the pain was so sharp. It almost imploded E*Trade, and Ken Griffin kept that from happening.

Citadel’s stake is 27,394,448 shares. We will not say that Citadel won’t maintain any influence due to trading relationships. Still, E*Trade’s relatively new management team will be freed up here.

Is it possible that The Charles Schwab Co. (NYSE: SCHW) or T.D. Ameritrade (NYSE: AMTD) might take an interest again? Sure, but we would look for E*Trade to get further past the Citadel voting ties, and we would look for E*TRADE to get its loans in better and better shape.

E*Trade has about 2.9 million brokerage accounts now. There is value there, with a $3.2 billion market cap. E*Trade shares are down 5.8% at $11.13 on the news, against a 52-week range of $7.08 to $11.82. The company’s strategic review reportedly was not handled well, and the previous “go shop” effort was not really an active one. That being said, maybe toward the end of 2013 or next year things will be clean enough that a buyer might have an interest. As a reminder, it does not just have to be another online broker that is interested. Companies like Capital One Financial Corp. (NYSE: COF) and many other middle-market banks, brokers and trading firms might be interested, after the books are given the “all clear” sign.

The question to ask after it is entirely clean is what price E*Trade will be worth all on its own. Interest rates might be higher by then, and these firms can start making money off client deposits too. E*Trade’s value might still be much higher down the road than today’s value.

IntercontinentalExchange Inc. (NYSE: ICE) was reinstated at Buy with a $170 price target as the transformational acquisition of NYSE Euronext Inc. (NYSE: NYX) is going well with strategic benefits as a result of the deal.

Nasdaq OMX Group Inc. (NASDAQ: NDAQ) was reinstated at Buy with a $34 price target as the exchange has attractive cash flow and optionality, and it is well positioned with more stable non-transaction revenues and can take advantage of new growth opportunities in the near term. It also can target a pick-up in trading activity and can potentially pursue strategic options.

CBOE Holdings Inc. (NASDAQ: CBOE) was reinstated only with a Neutral rating and a $36 target price. The report said:

While we view CBOE as well positioned for a pick-up in trading volumes, to remain differentiated from peers (given proprietary and exclusive products), to take advantage of new growth opportunities, and for management to continue to manage its cost and capital base effectively, given the current valuation, somewhat sluggish volumes, and rising costs, we see limited upside.

Still, it is said to have over 90% of the index option market share.

Several banks were very close to meeting all of our financial, historic and transformative criteria, and they may be eligible for the list of safest banks in 2014, or even after the stress tests and after decisions have been formalized over returning capital to shareholders. Some of the data may seem investor oriented, but the reality is that institutional depositors, creditors and trading partners generally evaluate peers with many of the same metrics. The global economic recovery has lost some steam at the same time that the stock market has recovered. The public needs to know which of the larger banks are safe, regardless whether the economy stabilizes or worsens again.

The criteria to be among the safest banks has to be very strict by nature. It also has to apply to the larger institutions, which are either money-center banks or have multiple-state geographies. To make the list, a bank either had to have a minimum of 100 branches or it had to have retail branches in multiple states as the base level for relevance and importance. We used banks with a minimum market capitalization of $3 billion and a minimum asset base of $20 billion. These safest banks had to have the bulk of their image tied to retail and commercial banking operations with many branch offices (probably eliminate, we said above). This eliminated the great fiduciary banks such as State Street Corp. (NYSE: STT) and Bank of New York Mellon Corp. (NYSE: BK), even though they certainly would be considered among the safest banks. It also eliminated the bank holding companies with no retail banking operations, such as Goldman Sachs Group Inc. (NYSE: GS) and Morgan Stanley (NYSE: MS).

24/7 Wall St. took a “Made in America” approach as well, and we screened out U.S. banking outfits that are actually subsidiaries of foreign banks. We also screened out the banks that were still in the process of making large, game-changing or transformative acquisitions, which are too difficult to evaluate in order to avoid absorbing any hidden or unknown risks.

With credit ratings becoming a risk again after a U.K. sovereign downgrade, and on the heels of the fiscal cliff and spending sequestration, all these banks also had to be considered investment grade by the major credit ratings agencies. A minimum hurdle of a 7.0% return on equity had to be seen, and we included the return on assets in this analysis as well. These safest banks had to have a minimum divided yield of 2.0% for their common stockholders, as proof that management believes that it can continue returning capital to shareholders through good and bad times, while still maintaining normal operations.

We screened out the nondiversified banks to avoid too many fluctuations throughout the business cycles. For an investment angle, we also gave preference to the banks where Wall St. analysts have a consensus price target above the current share price, indicating that some underlying value potentially remains. If a bank’s common stock was less than $10.00 per share, it had to have its metrics well above average among the largest banks.

Read Also: The Best & Worst Run Cities in America

While Bank of America Corp. (NYSE: BAC) was the best performing of the 30 Dow Jones Industrial Average stocks in 2012, it and the money-center banking giant Citigroup Inc. (NYSE: C) actually do not qualify to be in the safest banks in America, even though the reality is that these banks are almost certain to survive another recession. The Federal Reserve deems them to still be problem banks, and they have so far not been freed up to raise their dividends or to increase share buybacks. That may change ahead, and the reality is that these banks are believed to be strong enough to weather most negative scenarios under the impending stress tests.

Finally, we eliminated banks that we did not feel would survive another recession. Consumers have to keep their money somewhere other than under their mattresses. Having an extremely safe bank to protect your hard-earned cash, nest-eggs and safety deposit boxes in hard times is much more important than how high of a rate depositors can get on certificates of deposit and in their checking and savings accounts. As far as quality is concerned, Warren Buffett’s Berkshire Hathaway Inc. (NYSE: BRK-A) has large stakes in three of the seven safest banks.

In mid-2012, banking regulators proposed to incorporate Basel III capital changes for substantially all U.S. banking organizations. Our list of safest banks shows the Tier-1 ratio today as well as the company’s projected Tier-1 ratio under the proposed rules. This also helps to eliminate any problems over safety and vulnerability ahead. If Basel III is finally adopted as proposed, the threshold for the Tier 1 common equity ratio will be 7%, consisting of a minimum level plus a capital conservation buffer.

Based on the analysis, we anticipate that future lists of the safest banks in America may include 10 or even 12 banks, rather than seven, because many banks only missed one criteria yet exceeded other hurdles handily. We still are not evaluating the community or single-region banks due to size or single geography risks. That being said, many of those community banks have better ratios than any of the larger safest banks in America.

This is the 24/7 Wall St. list of the seven safest banks in America for 2013 to deposit money into, ranked in order of safety, size by assets, and reach.  Our rank is based on financial stability, size by assets, and by reach.

Boston Beer Co. Inc. (NYSE: SAM) is no longer really defined as a craft brewer in the classic “David versus Goliath” any longer now that its annual sales are almost $600 million per year with a market capitalization rate of about $2 billion. Still, the beer drinking public treats them differently because they have been a disruptive force to the big brewers.

Of the filings we have tracked, there are likely just as many or more which have not gone through the filing process. This almost certainly does not include any of the bootstrapped outfits financed by 1 person, or father and son teams, or the “2-friend brewers” out there. Some of these are craft breweries in the making or already under operations, and some are gastropubs.

There are literally millions and millions of dollars being raised and which are trying to be raised around the craft beer movement. A Form D filing search with the SEC of only the terms “Beer, Brewery, and Brewing” yielded the following results in just the last six-month period:

Alpha Brewing Company, LLC (SITE) of St. Louis, MO filed to raise $150,000 on October 17, 2012.

Armadillo Brewing Company, LLC (SITE) of Frisco, TX filed to raise up to $750,000 on September 20, 2012.

Atom Brewing Company, Inc. (FB-SITE) of Erie, Colorado filed an amended Form D originally from January 7 to raise up to $125,000 on February 19, 2013.

Beer Army Investors, LP of Trenton, NC filed as a limited partnership to raise up to $480,000 on January 14, 2013.

Beer By Design Brewery (SITE) of Brighton, CO filed to raise up to $420,000 on October 26, 2012.

Beltway Brewing Company, LLC (SITE) of Sterling, VA (circa-Washington D.C.) filed to raise up to $1,400,000 on December 21, 2012.

Black Abbey Brewing Co LLC (SITE) of Nashville, TN filed to raise up to $850,000 on September 21, 2012.

Bogus Brewing, Inc. (SITE) of Boise, ID filed to raise up to $1,000,000 on January 30, 2013.

Core Brewing & Distilling Company, LLC (SITE) of Springdale, AR filed to raise $200,000 on February 14, 2013.

Double Barley Brewing, Inc. (or Dubbel Barrel Brewing) (SITE) of Smithfield, NC filed to raise up to $600,000 on February 21, 2013.

Fargo Brewing Company, LLC (SITE) of Fargo, ND filed to raise $200,000 back on December 11, 2012.

Greenport Brewing Company, LLC (SITE) of Greenport, NY filed to raise up to $1,500,000 on December 11, 2012.

Harris Brewing, LLC of Portland, OR filed to raise up to $1,000,000 on December 21, 2012.

Hellbender Brewing Co. (SITE) of Washington D.C. filed to raise $350,000 on September 19, 2012.

Heretic Brewing Co. (SITE) of Pittsburg, CA filed to raise up to $1,000,000 on September 6, 2012.

Independence Brewing Company, Inc. (SITE) of Austin, TX filed to raise up to $800,000 on December 21, 2012.

Indiana City Brewing LLC (SITE) of Indianapolis, IN filed to raise up to $200,000 November 29, 2012.

Land-Grant Brewing Co. (SITE) of Columbus, OH filed to raise $1,000,000 on December 3, 2012.

Lonerider Brewing Co. (SITE) of Raleigh, NC filed to raise up to $1,102,550 on October 15, 2012.

Magnolia Brewing Company, LLC (SITE) of San Francisco, CA filed to raise up to $2,200,000 on October 10, 2012.

Ozark Beer Ventures, LLC of Fayetteville, AR filed to raise up to $250,000 on December 10, 2012.

Ploughshare Brewing Co., LLC (SITE) of Lincoln, NE filed to raise up to $500,000 on September 25, 2012.

Sanitas Brewing Co LLC (SITE) of Boulder, CO filed to raise up to $400,000 on February 25, 2013.

Santa Clara Valley Brewing, Inc. (SITE) of San Jose, CA filed to raise $65,000 back on November 14, 2012.

2 Way Brewing Company (SITE) of Newburgh, New York filed to raise up to $850,000 on February 6, 2013.

Union Craft Brewing Company, LLC (SITE) of Baltimore, MD filed to raise $800,000 on February 1, 2013.

Wisconsin Brewing Company, LLC (SITE) of Verona, WI filed to raise $8,000,000 on October 9, 2012.

READ ALSO: 9 Beers Americans No Longer Drink

We did not note all of the details in the financing efforts here. SOme of these brewing and craft beer efforts already completed their capital raising efforts. Some have raised a portion of the capital they were seeking, and some have raised no capital at all. Some have raised capital in straight equity terms, while others offered convertible notes, warrants, debt and other securities.

Today’s downgrade is to Neutral from Outperform. as the analyst team said that the bank’s current market valuation appears to be ahead of the company’s near-term to intermediate-term performance. What is interesting is that the target price appears to have gone to $12 from the $11 listed previously.

Credit Suisse prefers the other money center banks. It said:

The banking environment remains challenging in terms of the revenue and loan growth outlook; however, banks continue to make progress on controlling expenses and improving capital — which will be critical levers in 2013. We think that the banks best positioned are those institutions that can grow revenues, effectively manage expenses and deploy capital.

The firm ranks Citigroup, Inc. (NYSE: C), J.P. Morgan Chase & Co. (NYSE: JPM) and US Bancorp (NYSE: USB) on the top of its list of other banks. Credit Suisse’s top stock pick for 2013 is Citigroup.

Today’s downgrade also said that the stock price for Bank of America now appears to be discounting significantly faster improvements in efficiency than Credit Suisse is expecting. At its current valuation, the shares appear to be discounting at least a 16% improvement in costs over the next year versus its estimate of 10%.

Bank of America shares closed at $11.98 on Friday and the stock has already hit a high of $12.20 so far in 2013. Its shares are currently up 3.2% so far in 2013, but the peak price so far has been a gain of 5.1%.

Meredith Whitney made waves with a big upgrade back on December 17, but it is important to realize that the bank stock is up more than 13% from the closing price the day before Meredith Whitney’s upgrade.

Citigroup owns 49% of MSSB, or did, until today’s agreement. Morgan Stanley has agreed to purchase the remaining 35% stake by June 2015 at the $13.5 billion valuation. Morgan Stanley also has agreed to acquire the first part of that remaining stake — 15% — by June of 2013.

As part of the deal, Morgan Stanley received control of about $5.5 billion in MSSB deposits at no premium. Once the deal is completed, the bank will have about $122 billion in MSSB deposits.

MSSB employed nearly 17,000 brokers as of the end of June, more than any other U.S. brokerage firm. In June, Morgan Stanley said it planned to change the name of brokerage to Morgan Stanley Wealth Management.

James Gorman, chairman and CEO of Morgan Stanley, said:

This mutually beneficial agreement gives both parties certainty and transparency on price and timing, and is a significant milestone for Morgan Stanley in the implementation of our strategy.

Strategy was also on the mind of Vikram Pandit, CEO of Citigroup:

As we have shown, the more we put the past behind us, the more we can focus on our future, which is in the core businesses in Citicorp. Since forming Citi Holdings, we have reduced its assets by over $600 billion, and we will continue to do so in an economically rational manner.

The final valuation of MSSB was determined by an outside appraiser.

Morgan Stanley’s shares are up about 1.7% at $16.89 in a 52-week range of $11.58 to $21.19.

Citigroup’s shares are up about 1.9% at $32.43 in a 52-week range of $21.40 to $38.40.

Paul Ausick

On August 6, 2012, the Company entered into a securities purchase agreement, by and among the Company and the investors signatory thereto pursuant to which the Investors agreed to purchase an aggregate of $400 million of 2% convertible preferred stock of the Company. The Preferred Stock will be convertible into approximately 267 million shares of common stock of the Company. The Company expects the transaction will be consummated later this morning.

CNBC reported that the investors include the Blackstone Group LP (NYSE: BX), Getco, TD Ameritrade Holding Corp. (NYSE: AMTD), Stifel Financial Corp. (NYSE: SF) and Jefferies Group Inc. (NYSE: JEF).

Google Finance showed that before the new shares, the share count was close to 98.2 million shares. What will 267 million new shares do to the old shares? Major dilution.

To show just how bad this dilution is being received, Knight Capital shares are down 30% at $2.82 this morning in premarket trading, after closing up at $4.05 on Friday. The new 52-week trading range after adjusting for last week’s implosion is $2.27 to $14.00.

JON C. OGG