A huge 2nd Q loss at Wachovia Corp. (WB) surprised and deflated Wall Street on concerns that the financial sector still may have a rough row to hoe as it continues to reel from the now year-old credit crisis.

The cold slap in the face came when Wachovia, (the nation's 4th-largest bank), flopped out a stunning $8.86 billion loss due largely to charges and reserves for bad mortgage loans. WAMU also cut its dividend for the 2nd time in less than a year adding salt to the wound.

WAMU then delivered a further jolt noting that it would lose $3.33 billion in the second quarter as it boosted its loan loss reserve to more than $8 billion, giving investors a peek at the company's bad-loan abyss.

WAMU is in good company with many other financial institutions recently reporting similar losses. So why oh why would anyone want to BUY a bank stock right now?

Here's a possible reason: Banks, being the among the most heavily regulated and audited businesses in the world, tend to over book necessary reserves because anything less could lead to severe penalties, audit scrutiny and even worse press. The recent losses are mostly due to bolstered reserves - but keep in mind that such reserves are just that - a reserve or insurance against a potential loss. Over the coming months undoubtedly some of those potential losses will turn to REAL losses. But, unlike most companies that only show a loss after it is suffered, banks will have already accounted for the loss. In fact, they will most likely have OVER estimated the potential losses and they will eventually be able to reduce the reserves, adding those billions back to the plus column. The best managed banks will survive this current market and IMO come out smelling like a cash infused rose. I like WB, WFC, BAC, C and RY - all of which are having a bargain basement "1/2 price sale" currently. I am certain that there are also some very well run regional banks that will survive the current turbulence and probably emerge even stronger. If you know of some, please reply and list them here with your case for an investment.