"Sell in May and go away" is the saying, and bankers seem to have taken that to heart this year.  After a brutal nine months of near non-stop mayhem, Wall Street paused for a breather this week ahead of the long holiday weekend. The Chicago Board Options Exchange's much-watched volatility index, which shot above 90 during the height of the financial crisis last fall, is hovering near 30 now, its lowest level since right before Lehman Brothers ( LEHMQ - news - people ) collapsed.  At present, the most gripping drama in banking is the auction of BankUnited, Florida's largest bank and one of its most troubled. Many expect the Federal Deposit Insurance Corp. to take over the bank as early as Friday and sell its assets. Wilbur Ross' WL Ross, the Carlyle Group and Blackstone Group ( BX - news - people ) are believed to be interested bidders, as is Toronto's TD Bank, with Goldman Sachs ( GS - news - people ) as its wingman.  The FDIC typically closes banks on Friday once it's arranged for another bank to take over the insured customer deposits.  The frenzy of activity in the markets abated once the government released the stress test results of the 19 biggest banks earlier this month (see "For Most Banks, Not Too Stressful"). Since then banks have been selling common stock to raise capital to either repay money received under the Troubled Asset Relief Program, to shore up capital levels or both.  This stock-selling will almost certainly improve the financial performance of some of the biggest banks for the second quarter, since a few of them are grabbing the biggest share of underwriting fees. "The Federal Reserve's plans to strengthen the U.S. financial institution capital bases may be providing a new lease on life for Wall Street equity underwriting," says Brad Hintz of Sanford Bernstein.  The dollar volume of stock issued so far this quarter is $135 billion--compared with $71 billion for the entire first quarter--and there's more than a month yet to go. Underwriting banks mopped up $3.4 billion in fees for stock sales so far this quarter, led by Goldman Sachs ($516 million in fees), JPMorgan Chase ( JPM - news - people ) ($481 million) and Morgan Stanley ( MS - news - people ) ($424 million).  Some of this was banks paying themselves for capital raising. Bank of America ( BAC - news - people ) sold $13 billion worth of stock this month, getting it partway to the government-suggested goal of $35 billion in new capital it needs to raise. Its underwriting fees from stock issuance in the quarter were $273 million, according to Dealogic.  The surge in stock underwriting will help banks at least temporarily overcome continued weakness in other businesses, not to mention more credit losses, the same way interest-rate trading helped them overcome deteriorating loan books in the first quarter. All of this advances the government's goal of stabilizing the banking system, even if the improvement is merely cosmetic.  Next month the Treasury Department will set timetables for the biggest banks to repay their TARP money, allowing them to shake free of curbs on compensation and other restrictions and possibly unleash a wave of mergers.  Goldman Sachs and JPMorgan are said to be eager to repay TARP, as are Morgan Stanley, Bank of America, Bank of New York Mellon ( BK - news - people ) and American Express ( AXP - news - people ).  The timing of the repayment depends on the Federal Reserve's view of the adequacy of capital at banks untethered by government assistance. That means the banks will have to prove they can attract private capital that doesn't have any government guarantees, like the FDIC's debt guarantee program.  Not every bank will be able to get there as quickly, leaving the door open for mergers, analysts say. Regions Financial ( RF - news - people ) was told to add $2.5 billion to its Tier 1 capital. If it converted the government's preferred share holdings under TARP, as Citigroup ( C - news - people ) is doing, the government would end up with 47% ownership.  To avoid that, Regions could seek a merger partner, surmised the analysts at Fox Pitt Kelton, who see JPMorgan and BB&T Corp. ( BBT - news - people ) as attractive bidders. But it may not come to that. On Thursday, Regions said it sold $1.8 billion of new shares.  The government is also supposed to set the terms of its Public-Private Investment Program, the maligned plan to lend private-equity firms money to buy toxic assets from banks, which has been four months in the planning (see "Its a PPIP-Squeak").  All of this is buying banks time to figure out where to zig or zag next.
Volatility is down, investors are pumping capital into banks and a surge in underwriting promises to support earnings.