Political Pandering

Well, it seems that Barney Frank has no more brains than Barney the Dinosaur. According to Housingwire, they demanded TARP funds back from Northern Trust. Apparently, Northern Trust sponsored a lavish golf event. Unlike money-losing banks like Citigroup, Northern Trust was profitable in 2008. My guess is that they were force-fed the $1.5 billion in TARP that they received.

There are so many good companies real cheap out there: DIS, FWLR, SDRL, TOL, but with political hacks like these running the show, it makes me even more bearish.

Bernanke's latest speech was a disaster. The plan is to take "Ownership Stakes Only as Losses Rise."

Translation: the banks are dead zombies and we don't know how big the losses are. If we knew, we wouldn't want to admit it. Therefore, we will keep them on life support. Whenever they keel over and flatline again, we will give them another transfusion.

Keeping comatose banks alive at great cost is a disaster. The time has come to admit the losses, wipe out the shareholders, give failed management the boot, turn the debt into new equity, and inject enough capital to make the banks healthy again.

There are some problems, as there always are. First, many institutional debtholders aren't allowed to hold equity, and would have to sell. I say, better get something to sell than try to recover through bankruptcy, or suffer the fickleness of the government. The second problem, as personified in Bernanke, is that there is no political will to admit the size of the problem and fix it. No nationalization, my ass! The banks have been 70-90% nationalized anyway. Or maybe Bernanke doesn't understand the problem....

"We're not making it up, Bernanke told the House Financial Services panel. We're working along a program that has been applied in various contexts. We're not completely in the dark." - Marketwatch