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A Bank Rally?

Believe it or not we had a financials rally on Wednesday, something most investors probably thought would never happen again. Not after the virtual decimation of the banks we’ve witnessed over the past year and half. But it turns out Treasury Secretary Geithner leaked some info to the press – his modus operandi these days – and that sparked the buying.

Bank of America , JPMorgan Chase , Wells Fargo and PNC Financial all saw nice gains, at least for part of today’s trading session, because Geithner’s “stress test” won’t necessarily mean the end of the hardest-hit U.S. banks. At least that’s what he whispered to his favorite reporters. But of course, the Treasury secretary never made a public announcement, and President Obama’s late afternoon speech offered no further details. That, unfortunately, killed the rally’s momentum.

But there might have been another force at work, namely Federal Reserve Chairman Ben Bernanke. His congressional testimony over the past two days seems to indicate that this guy finally gets it, Cramer said. The overall sentiment viewers got was that Bernanke won’t let anymore banks fail, nor will any be nationalized, and short sellers will be put in their place. He even went so far as to blame unregulated bear raids for being a big part of the trouble we’re in.

Remember, the uptick rule forced traders to wait for a stock to “tick up” in price before selling it short. It was created after the Great Depression in hopes of curbing the relentless selling pressure that so hurt the banks then and caused the downturn. But former SEC Chairman Christopher Cox eliminated the rule, allowing bear raiders to again threaten the existence of many financial institutions and put us on the verge of another Great Depression. The UltraShort Financials ProShares exchange-trade fund has played a key part in hurting banks as well by letting traders sidestep the SEC’s margin rules. The SKF takes $1000 investment and turns it into $3000, adding even more weight on the stocks it shorts. So it’s no wonder that taxpayers are on the hook for trillions of dollars of bailout money.

Beyond Ben Bernanke, FDIC Chairwoman Sheila Bair has proved herself competent as well. She said today that she agrees with the Cramer plan, which would give banks enough money to work their problems out in the private sector as they as they could pay it back. Cramer called it a way to take control of the banking system rather the banks themselves.

So there’s reason to hope this rally could continue, Cramer said. Geithner offered positive news (even though it was just a press leak), Bair seems to be onboard, and so is Bernanke. Investors might want to hold on just a little longer.




Cramer's charitable trust owns JPMorgan Chase and Wells Fargo.

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