If the FDIC can come in and seize WaMu (WM), how are they not going to seize BankUnited (BKUNA) and Downey Savings (DSL)? These are the obvious ones, the ones that the FDIC needs to see made whole or will take them, take the liabilities and sell the deposits. Both are damaged and wounded institutions that I would put in the camp of WaMu, and both need to be seized to make sure Congress knows the stakes and what is about to happen here.

“How much was made of the FDIC's "problem bank" list yesterday? Frankly, a little too much -- the list could be 200 banks long and be insignificant or it could be five banks long and be of incredible importance.

Is there any doubt that that the FDIC can handle 100 banks of the $1 billion to $2 billion variety? There shouldn't be. They can look the other way on most of them if they have to, or close them sequentially while asking for more capital along the way.

But if BankUnited (BKUNA) with $7 billion in deposits goes under, that'd makes headlines. It would be particularly newsworthy because it is in a visible location (the Miami area) and would cause a flood of stories about older people worried about their deposits -- pensioners -- and a big round of stories about how horrible Florida real estate really is. Then you get stories about how IndyMac and BankUnited represent the "system," and when you add that to the woes of Fannie (FNM) and Freddie (FRE) -- which are now directly making it harder to get cheap mortgage money because they are paying through the nose for their own money and buying fewer mortgages, just want we don't need -- and you get headlines galore about how bad things are. When you couple that with the inaction of Treasury on the FNM/FRE front, you are going to be in for a test of the July 15 lows.

In the worst moments of the 1990 crisis, pretty much every bank was on the list, so I am not too concerned. But the market's more motivated now, the shorts are more aggressive now, and FNM and FRE are now making things worse, so a BankUnited failure -- they got the notice, and I doubt they can raise the money -- would be the exact opposite of what this market needs.

Keep your eye on Florida for two hurricanes this weekend: Gustav and BKUNA. It's pretty much all that matters to the direction of the next leg of this market.”

The banks he fears are in deep financial trouble are Downey Financial (DSL), Corus Bankshares (CORS) and BankUnited Financial (BKUNA).

He said he's most worried about Downey Financial (DSL), Corus Bankshares(CORS), FirstFed Financial (FED) and BankUnited (BKUNA).

have sold this security short

Washington Mutual (WM), Wachovia Bank (WB), Capital One (COF), National City (NCC), Huntington Bancshares (HBAN), Downey Financial (DSL), BankUnited Financial (BKUNA) and Corus (CORS).

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BankUnited (BKUNA) was downgraded from Overweight to Neutral, JP Morgan said. Upside could be limited by the challenging credit outlook, and deepening housing downturn.

BankUnited Financial (BKUNA) was downgraded to Market Perform, Keefe, Bruyette & Woods said. $17 price target. Estimates also cut, to reflect the company's new guidance for non-performing assets.

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There are several banks -- two of them on the West Coast, FirstFed Financial (FED) and Downey Financial (DSL), and one of them in Florida, BankUnited (BKUNA) -- that have a lot of these so-called option adjustable-rate mortgages, for which you don't have to pay the interest for a long time, and so they won't show defaults for several quarters still -- but when they do, the defaults will jump very sharply.