What Banks Want

Henry Paulson summoned the best in the business to discuss what’s necessary to get the gears of commerce working again. Lloyd Blankfein of Goldman Sachs (GS), John Mack of Morgan Stanley (MS), Vikram Pandit of Citi (C), Jamie Dimon of JPMorgan (JPM) and Ken Lewis of Bank of America (BAC) laid out the steps needed to get the sector moving again.

Immediate:

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• International coordination and cooperation by financial regulators
• Fair value accounting
• Market manipulation
• Inter-bank lending
• President’s working group

Near Term:
 

• New public capital
• New private capital
• “Open bank” assistance and depositor confidence
• Public purchases of MBS
• Public insurance for assets
• Strengthening financial institutions
• Foreclosure prevention
• Public insurance for assets
• Enhance liquidity at the Federal Home Loan Banks
• Expansion of money market guarantee program

Intermediate Term:
 

• Stimulus plan for housing
• Expansion of FDIC failure resolution procedures
• Office of insurance information
• Credit default swaps
• Systemic regulatory reform

Wow…all I can say is…wow!

It was the best session anyone alive has ever seen, and it still feels surreal. Investors have been so beaten down that few bought into yesterday -  both figuratively and literally. By the same token, there was a lot of money waiting for the rebound; they knew that, historically, getting in on such a session is extremely significant with respect to long term returns.

The majority of investors are so gun-shy, the Dow might have to climb to 14,000 before they feel the coast is clear. In the meantime, there's a serious test of resistance at 9,600, then at 10,800.


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