It appears the FDIC has decided that in order to protect taxpayers and customers of the weaker banking institutions, it needs to coordinate private deals to boost confidence and limit the government's deposit insurance losses. So far they are doing a pretty good job given the current turmoil in the banking industry.

So who are the winners and losers? Well, it's not rocket science. Poorly run banks are paying the price and the strong banks are getting really sweet deals to take over deposit bases, bank branches, ATM networks, etc for pennies on the dollar or are simply gaining market share as customers find new banks to use.

As for investment strategy, those people who have avoided the bombshells and focused their financial services allocations on those perceived as the stronger players have done relatively well if their analysis proved accurate.

From Peridot Capital's perspective, I have thus far avoided the disasters (knock on wood). Rather than avoiding banks altogether, however, Peridot is invested in four institutions with strong deposit bases and manageable bad loan exposures. I have mentioned all of these names on the blog over the last couple of years, but below is a recap of the banks that Peridot owns along with their stock performance in the current quarter (Q3 2008):

*Bank of America (BAC) +57%
*Capital One Financial (COF) +45%
*PNC Financial (PNC) +34%
*U.S. Bancorp (USB) +30%

Now, am I piling into these names at current prices? No. They have had huge runs this quarter because they are the stronger players and capital has flocked to the likely survivors. However, strong banks should be on investors' radars because there will be more financial shocks and during widespread financial share price weakness, everyone gets hit hard, presenting opportunities for those who want to separate the baby from the bath water.

Full Disclosure: Peridot was long all of the companies mentioned at the time of writing