Tuesday, April 21, 2009

Socialist Meddling

Why did stocks drop sharply yesterday? A pullback after an improbable six week advance? The immediate driver was the leak over the weekend that the Treasury was considering exchanging its preferred equity in US banks into common equity AND SecTreas' Geithner's comment that health of individual banks may not be the SOLE criterion for repayment of TARP money.

Healthy banks, some of whom had TARP money forced on them for the sake of the overall financial system last fall, want to pay it back as quickly as possible to get the government of their boardrooms. Goldman, Sachs and JPMorgan are at the head of the pack.

The Obama Administration likes to meddle and would like to do indefinitely. There's been a largely unspoken fear that healthy banks would not be permitted to pay TARP back. An excuse that it would be better for the financial system was likely or perhaps even more fearfully a diktat that said no one would be allowed to pay it back until all the banks can pay it back to assure a level playing field. Citigroup and Bank of America will take YEARS to pay it back.

If the House's 90% punitive tax plan was any indication, neither the Administration or Congressional Democrats (and the 80 or so idiot Republicans who voted for this bill), government in the boardroom is a bad idea. This is why financials took a tumble yesterday with financials leading the way.

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