Tuesday: Fed Chairman Ben Bernanke warned the "severe" U.S. recession may drag into 2010 unless the government succeeds in stabilizing the banking system and financial markets. Debate continues on bank "nationalization," with Bank of America insisting it won't need a bigger U.S. stake; and analysts wondering if Citigroup actually needs the government to pick up more than 40 percent. Experts told CNBC that fears of nationalization are overdone — and we're now entering the epicenter of the recession.
Fed & FDIC: The People Who Can Really Solve the Problem
Dial down your focus on the Treasury, said Kevin Ferry of Cronus Futures Management. Give it a chance to straighten out an exceedingly complex problem, administration-wise. Dial up your focus on the Federal Reserve and the FDIC, the two institutions that are going to be the "real guide out of this problem."
Dread of nationalization is not wholly realistic, because the deposit base has actually been nationalized already, says Ferry. He differs from his Chicago colleague Rick Santelli in that Ferry feels toxic assets should be compartmentalized, not politicized.
(See Bernanke's Response to 'Santelli's Tea Party')
Eye of the Storm; Hold Out for H2 '09
We're reaching the epicenter of the recession, according to Chris Varvares of Macroeconomic Advisers, and we should see growth resuming in the second half of the year. Q4 looks even worse with each revision, and now appears the numbers will show GDP growth at negative six percent. Q1 is likely to come in at negative five percent, with more retreat in the second quarter. H2 growth now looks like 2 percent, maybe a little more.
No More Soothsayers — We Need Cheerleaders Now
Performance Trust Capital's Brian Battle accused the Obama administration of being like Spiro Agnew's nattering nabobs of negativism: "Pass this package or else." Absent any positive reinforcement from the administration, the financial community looked for for it in Ben Bernanke's remarks today. Battle said Sen. Christopher Dodd's phrase, "temporary nationalization," is an oxymoron. The market demands a more systematic response.
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