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I watched 60 Minutes last night and was very interested in the first, ever, interview of a Federal Reserve chairman. Times must be quite serious that the veil of secrecy was willingly lifted from Ben Bernanke and his fortress cum palace in Washington. In general, I think his goal of generating greater confidence in him and his efforts to stabilize the banking system worked. Bernanke came across as a smart and learned administrator firmly in control of the challenges before him. Coincidentally enough, Bernanke - a PhD in economics - specialized in the Great Depression and so may be uniquely qualified to lead the Fed now. Perhaps President Bush knew something that the rest of us didn't when he nominated Bernanke for the job in 2006.

In any event, something Bernanke said stuck with me and reminded me of one of my favorite movies. Remember in 'Trading Places' when Randolph and Mortimer Duke were conspiring to get that season's orange juice 'crop report' before it was released? If I recall, the Dukes, blinded by their unabated greed, wanted to corner the market on orange juice futures and tried to get an advance copy of the report with which to inform their fraudulent bets. Of course, Eddie Murphy and Dan Akroyd's characters intercepted the report and used it to place bets themselves - making them rich and tanking the two old geezers. Well, Bernanke may have given the public something of a 'crop report' last night. As a part of his plan to sustain the banking system and kick-start an economic recovery, he made the firm assertion that no American bank would be allowed to fail. Interesting! The rally of the last few days was started by positive news from Citibank - one of the largest and most visible of the teetering financial institutions. To no surprise, their stock has been trading at historic lows. As Bernanke was saying this I thought, if we know that Citibank will never fail - and knowing how high profile that institution is and the degree to which psychology of the markets plays such an extraordinary role (i.e. their failure and/or success would have a huge impact on the over-all markets and economy) - Citibank would seem to be a great place for investors to put their money. To a very real degree, President Obama's very political future may largely rest on the success of that one bellwether institution. It stands to reason that they would do whatever it takes to support them, to prop them up, to wean them back to beyond solvency - to good health. From the administration's standpoint, there's a heck of a lot riding on it.

Fed Chairs have to be careful what they say. Their words have the power to literally move markets one way or the other. Bernanke's efforts to inject confidence into the markets may mean some particular buying opportunities for investors bold enough to redeploy some of their money back into the stock market now.

BTW - how did Citibank stock do today? Up a resounding 31% 15

© MBM

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quote:
Bernanke's efforts to inject confidence into the markets may mean some particular buying opportunities for investors bold enough to redeploy some of their money back into the stock market now.

BTW - how did Citibank stock do today? Up a resounding 31%


So the question is ...

Whose buying? The Dukes or Eddie and Dan? Is Bernanke's report the Eddie and Dan Ginned Up report, or the real report?

I guess we could look at the volume of [short sell] options say 3, 6, 9 12 months out compared to the pre-statement options. 19

We could also [to a lesser degree] track insider activity 19

I fear that this is just move to transfer more wealth from the middle [panicking] class.
quote:
Originally posted by MBM:

The rally of the last few days was started by positive news from Citibank - one of the largest and most visible of the teetering financial institutions.

BTW - how did Citibank stock do today? Up a resounding 31% 15



From Cholly's Thread on Bikram Pandit, Ceo:

quote:
At the same hearing, Pandit pledged to accept a salary of just $1 a year and no bonus until Citibank once again posted a profit.




Isn't it interesting that Pandit CANNOT get his millions until Citibank posts a profit and Ta Da! we've been hearing reassuring things about citibank? 19
quote:
Originally posted by Kweli4Real:

quote:
Bernanke's efforts to inject confidence into the markets may mean some particular buying opportunities for investors bold enough to redeploy some of their money back into the stock market now.

BTW - how did Citibank stock do today? Up a resounding 31%


So the question is ...

Whose buying? The Dukes or Eddie and Dan? Is Bernanke's report the Eddie and Dan Ginned Up report, or the real report?

I guess we could look at the volume of [short sell] options say 3, 6, 9 12 months out compared to the pre-statement options. 19

We could also [to a lesser degree] track insider activity 19

I fear that this is just move to transfer more wealth from the middle [panicking] class.


A lot of the short options are obviously just going to expire worthless. Moreover, there's not much more room for the stock to go down anyway so I'm not sure what could be out there. As folks start to connect Obama's political fortunes with the banking system's health and Citi's bellwether stature - the stock will (seemingly) sky rocket as a result. Again - huge percentage gains are relatively easy from the absolute depths of the stock now.It was up 31% to $2.33 today. For perspective its 52 week high is $27.25.
here's a link where Bernanke is calling for reform just a few days before he says everythings gonna be fine in 2009...What's up with that? 19


Wall Street Journal: Bernanke Calls For REform...

Bernanke Calls for Broader Regulations

By DAMIAN PALETTA

WASHINGTON -- Federal Reserve Chairman Ben Bernanke said regulators should be given broad new powers to oversee financial markets, reflecting the Fed's evolving view that a more aggressive government hand is needed to ensure the future safety of the financial system.

Among his recommendations were tougher capital requirements for big banks, limits on investments by money-market mutual funds, and the introduction of some mechanism that would allow the U.S. to wind down big financial institutions and possibly run them temporarily.

MORE
Real Time Econ: Bernanke Turns IntrospectiveMr. Bernanke's speech, delivered Tuesday to the Council on Foreign Relations, mark his most specific comments on how to rewrite the rules governing financial markets. They come days before global finance ministers meet in London to discuss new regulatory models to oversee the flow of credit.

The recommendations were largely consistent with measures being pushed by House Financial Services Committee Chairman Barney Frank (D., Mass.), who is expected to be a key architect of the new financial regulation.

There was one exception. Mr. Frank has said any changes would have to discourage "excessive risk taking" by executives, which he argues helped fuel the financial crisis. Mr. Bernanke didn't touch on compensation practices in his speech.

Mr. Frank said he was supportive of Mr. Bernanke's proposed outline. He said the speech reinforced for him why the Federal Reserve should be given powers to broadly oversee the safety of the entire financial system. Currently, various regulators oversee discrete parts. "I don't know who else could do it," Mr. Frank said.

President Barack Obama has charged Mr. Frank with developing an outline of how a new system would work in time for the Group of 20 meeting in early April.

U.S. and foreign leaders are broadly in agreement that changes must be made to the way large, complex companies are overseen. But considerable differences remain on thornier issues, such as the supervision of hedge funds. Europeans will likely look to take a stronger line than their U.S. counterparts.

Treasury Secretary Timothy Geithner on Tuesday previewed some of the regulatory changes the Obama administration will be pushing with foreign leaders in coming weeks during an interview on the Charlie Rose show. Mr. Geithner said there would have to be "more focused accountability" and a "much stronger set of oversight over all institutions that could pose risk of damage to the system." He said core parts of the financial markets, such as markets for derivatives and other complex products, must "have a basic framework of oversight around them."

Mr. Geithner also said there would be stiffer capital requirements to deter companies from becoming overleveraged "so that a mess like this never happens again."

Mr. Bernanke defended the U.S. government's efforts to stabilize the financial sector and reiterated that U.S. officials would ensure that large financial companies "would be able to meet their commitments." He also pushed for much tougher policies over these big companies.

"Any firm whose failure would pose a systemic risk must receive especially close supervisory oversight of its risk-taking, risk management and financial condition, and be held to high capital and liquidity standards," Mr. Bernanke said.

The Federal Deposit Insurance Corp. has the power to shut down and sell large federally insured banks, but it isn't able to shut down the parent companies of banks or huge financial affiliates that don't have insured deposits. FDIC and Fed officials have urged Congress to give a regulator such powers. Mr. Bernanke offered details Tuesday about what such an entity might do.

He suggested the government could take these large companies and create a "bridge" institution, which would allow the government to temporarily run the company while the firm or parts of it are being liquidated. This is similar to the powers the FDIC has for large banks. The FDIC created a similar a structure last year after the failure of IndyMac Bank.

Mr. Bernanke said there should be "clear guidelines" identifying which companies might qualify for such treatment and which banks wouldn't.

Write to Damian Paletta at damian.paletta@wsj.com

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