Ain’t It Grand?
Some speculation as to the motives behind today’s Fed move, via The Big Picture:
“The Federal Reserve’s actions today may have been strongly influenced by Bear Stearns’ problem.”
-Dick Bove, Punk Ziegel & Co.Go figure: This morning’s announcement by the Fed seemed to be designed to help the brokers and their fixed-income hedge fund clients who were struggling — so said Brad Hintz, Bernstein Research covering the Financials. (we noted similar sentiment here)
He’s not the only one. Influential Bank/Broker analyst Dick Bove of Punk Ziegel (quoted above) specifically mentioned Bear Stearns (BSC) as the beneficiary of the Fed’s largesse.
According to Marketwatch: “Bear’s stock dropped 11% on Monday on concern that its borrowing costs are rising. For a brokerage firm, which relies on steady access to financing, such disruptions can restrain its businesses and leave it at a disadvantage to financially stronger rivals.”
Pretty wild stuff — $200 Billion in Fed lending against junk paper, to bail out one mid-size investment bank.
And the market’s reaction: Dow up 3.55% (417 points), Nasdaq +4% or more than 86 points, S&P500 up 3.7% or 47 points
Ain’t Socialism grand?
True or not? We’ll never know.
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That’s the same message I got from the recon lemming this morning. This isn’t as much about saving Bear Stern as it is about insuring that the customers of Bear Stern don’t sieze up in another credit/liquidity(/solvency!) crunch which would cascade how far? A stitch in time saves billions, as the saying goes.
Comment by Fred — 3/11/2008 @ 10:08 pm
That lemming obviously has connections…
Comment by BMB — 3/12/2008 @ 8:15 am