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The Banter on the Beltway

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Analyzing the latest from Capitol Hill.

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At this morning's Congressional hearing, Federal Reserve Bank of New York President Timothy Geithner said, "The market on its own can't solve the financial crisis" and that the Fed's actions brought a "tentative calm" to the markets. By tentative, I assume he means that Bear Stearns (BSC) was a one-time event, as Chairman Bernanke said yesterday?

As I've said, government intervention -- at this point -- is like the Iraq war. You may not have agreed with the initial occupation but a sudden pullout will have profound consequences. So here we are, in a world where the government is inextricably linked to big business and, through the inevitable regulation that will follow, vice versa.

It's a huge game of chicken, with cumulative imbalances on one side and socialization on the other. That's the trade, one way or the other, for better or for worse.

Also of note was the comments by Jamie Dimon of JP Morgan Chase (JPM), who offered that JPM was the only firm in a position to help Bear Stearns (with the implicit guarantee of the Fed, of course). I would assume he means other than Bank of America (BAC), which was also in a position of power before it "chose" to rescue Countrywide (CFC). I have little doubt that they also got the call, albeit one we weren't privy too.

How do you trade this? Carefully. What's clear to me is that there is a massive agenda. What's also clear is that the Fed is running out of rescue vehicles in the private sector. It still has ammunition -- including but not limited to a massive mortgage trust -- so two-sided risk not only remains, it remains so on a grand scale.

See both sides, and manage risk accordingly.

Check out Toddo's interview this morning on Tech-Ticker, discussing the shrinking divide between Washington and Wall Street.

No positions in stocks mentioned.

Todd Harrison is the founder and Chief Executive Officer of Minyanville. Prior to his current role, Mr. Harrison was President and head trader at a $400 million dollar New York-based hedge fund. Todd welcomes your comments and/or feedback at todd@minyanville.com.

The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

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