Bernanke, Obama and a Rare Geithner Sighting

February 25, 2009

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Bernanke, Obama and a Rare Geithner Sighting

by StockJockey at 1440 Wall Street

Ben Bernanke, Belle of the Ball? Not quite, and I do feel bad for him. His predecessor was "the Maestro" but I doubt Main Street would buy Ben a beer in a bar, but they might sucker punch him.

Still, he sparked a rally yesterday in an oversold market, and is gaining fans in certain circles:

Federal Reserve Chairman Ben S. Bernanke spurned outright federal control of U.S. banks in favor of a public-private partnership that the government would eventually exit.

Bernanke told lawmakers yesterday the government would use supervision instead of shareholder control to guide major banks, and warned against dismantling their franchises. The remarks eased concern Treasury Secretary Timothy Geithner’s financial plan would push aside private shareholders, and spurred the biggest gain in financial shares in a month.

“Bernanke was a voice of reason and he provided clarity in areas where others have failed,” said Tony Crescenzi, chief bond-market strategist at Miller Tabak & Co. LLC in New York. The Fed chairman assured markets that “the nation’s banking regulators were not proposing nationalizing banks.” Bloomberg

Yesterday could very well prove to be the high-water mark of Bernanke’s tenure, but at least he will get a good night’s sleep for a change. Truth be told cleaning up after Greenspan is probably beneath his pay grade, but somebody’s got to do it.

The debate over nationalization has been confusing to most people – I had thought grabbing the usual suspects, cleaning them up and spitting them back out was a reasonable idea, and something the market would eventually embrace.

But even Chris Dodd is now standing down…Is it completely dead?

Josh Rosner apparently won’t rule it out, and it really does not sound so terrible:

Joshua Rosner, an analyst at the investment research firm Graham Fisher & Co. in New York, said the government may not run banks with the same sort of control it now has over mortgage finance companies Fannie Mae and Freddie Mac, which are under federal conservatorship.

Competitors are already putting the screws to Citigroup, asking regulators to effectively neuter them, and it is hard to see their capital markets operations reaching their former glories, like when Jack Grubman or Keith Mullins prowled the halls.

Good times.

And while I don’t expect we are out of the woods by any means, I continue to look forward to the public-private partnership that Treasury Secretary Geithner will presumably soon brief us on. Assuming he has been able to run the political gauntlet, that is.

But he is probably making some headway, despite being short handed on staffers. The TALF was to be expanded to approximately $1 trillion, and everyone manning a trading turret will remain on Defcon 4 until we know what this will look like:

More details on a public-private partnership to buy banks’ illiquid assets will be delivered in coming weeks, a U.S. official said in Rome on condition he not be named.

Geithner’s plan to tackle the U.S. credit crisis also includes additional injections of capital into financial institutions and as much as $1 trillion to promote new lending to consumers and businesses.

The bulls have had sentiment and, to a lessor extent, valuation on their side for months now. It has not done them much good, for sure, and pitching stocks has become so out of favor and derided, perhaps something will soon give.

Something wicked this way comes, and perhaps the cocky bears will soon end up boiling in the cauldron. But for the time being, nasty bear market rallies, that peter out quickly, are probably the best the bulls can hope for.

The only question I have is…will Ben have to take his final whipping before we get to the promised land?

The Europeans seem to be running with the ball this morning and buying into Mr. Obama’s speech, but I can’t help but wonder if the President’s constant bashing of Wall Street will keep the cost of capital elevated. Yes, Barack, there were a lot of assholes, but most of them have been shot, and it is time to extend an Olive Branch to the Wall Street Warriors left standing.

President Lincoln would probably agree. We are not necessarily rivals, Mr. President, but can still be a pain in your ass if you don’t dial down the rhetoric.
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Obama to Hold Banks “Fully Accountable”

Which does not mean your credit card rates will go down, necessarily.

“those days are over” video:

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