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Banks Under Obama

All eyes are on banks stocks this week after the Street learned that the Obama team plans to make changes to the TARP.

Last week the Senate cleared the way to release the remaining $350 billion from the $700 billion financial bailout aimed at stabilizing the sinking economy.

However, to win approval, Obama and his team made extensive promises to Democrats and Republicans that the funds would be used to better address the deepening mortgage foreclosure crisis and that tighter accounting standards would be enforced.

According to Rep. Barney Frank (D-MA) expect two clear changes in the way TARP money is used.

1) “The biggest single change is that Obama will be using up to $100 billion to avoid foreclosures,” Frank says.

2) Also, banks will only receive money after “they tell the government how the money will be used. And no bank will be permitted to use TARP money for an acquisition unless it’s made clear that it’s to the taxpayers advantage.

Will the changes help lift banks stocks?

According to CNBC’s Bob Pisani, don’t expect miracles; the Street doesn't believe the TARP is working. He says, “the Street believes that the financials leading the market down is an indication of where the market is going over the next 6 months.”

He adds “the bulls think we’re going to be flat over the next 6 months and the bears think we’re down 10%.”

What’s the bottom line? The Street is just bearish on the financials right now, concludes Pisani. Right now they have no earnings power and the Street doesn’t see anyway out in the near future.




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