The desire of many banks to give back TARP money—and the lack of a process to do so—is again a topic of converstation on trading desks this morning.
I noted yesterday that traders think it is unlikely Geithner will even accept money back right now, certainly not before the stress test is completed at the end of April.
Aside from the philosophical arguments against returning the money (banks should use money to shore up capital first), traders agree that Treasury does not even have a program in place to facilitate returning TARP money. The only clear fact seems to be that the primary bank regulator must approve any TARP redemption.
It's widely believed that Geithner will shortly address this lacunae in the TARP plan and promulgate uniform rules for the return of TARP money.
Geithner will testify in front of the House Financial Service Committee this morning at 10. Let's hope someone asks him about this.
As for the stress test, the majority of traders continue to believe that some banks will fail the test, and this will lend credence to the crowd that believes that several banks will need to be taken over and have thier assets sold to the private sector.
This group believes that Geithner's request for broader authority to take over banks—which he requested this week—is a sign that Geithner believes some banks will in fact need to be taken over.
Bank stocks are trading up in the low single-digits; commodity stocks are also up as key commodities like oil and copper are sitting near their highest levels since November.
Elsewhere, several companies reported earnings better than expected:
1) Best Buy's earnings of $1.61 were well above analysts' consensus of $1.40. Guidance of $2.50-$2.90 for next year is also above consensus at $2.50.
Good numbers, but not surprising: with Circuit City liquidating, they should be gaining market share. They will open 65 net new stores opening in fiscal 2010.
2) Beverage company Dr. Pepper Snapple Group posted Q4 earnings above estimates despite declines in soda volumes. Flagship product Snapple saw sales volume decline 17%. For the year, it expects to earn $1.59-$1.67 vs. expectations of $1.62, a solid number given the uncertainty.
3) Packaged food producer ConAgra Foods up 5 percent pre-open on earnings of $0.40, 4 cents a share ahead of expectations, on price increases. Reaffirmed its 2009 earnings forecast of "slightly above $1.50," ahead of estimates of $1.47.
4) Barclays trading up 15 percent as Credit Suisse said that the bank's plan to sell its iShares unit "gives us more comfort on Barclays' capital adequacy." Separately, the WSJ reports that Bain and Colony Capital are teaming up to bid for iShares.