Five Things: Markets Lose Faith
All hope abandon ye who enter here.
Eternal, and eternal I endure.
All hope abandon ye who enter here."
- Dante Alighieri, "Divine Comedy"
1. No Confidence in Treasury
A week ago today, Treasury Secretary Tim Geithner made his first formal public appearance to outline a much-anticipated plan for the banks. According to the Washington Post, Geithner "didn't have enough time to work out many details or consult with others before the plan was supposed to be unveiled." But Geithner is the same guy who was running the New York Fed for the past five years. How much time did he need? And so the speech was disastrous. Geithner seemed weirdly unprepared. And that was even after delaying "the plan's" unveiling by a full day.
The market verdict was simple: no confidence.
The PHLX Bank Index (BKX) is down nearly 22% since the "Geithner Plan" was announced. Citigroup (C) is down nearly 20%. Morgan Stanley (MS) down 16%. JP Morgan (JPM) down 18%. Even Goldman Sachs (GS) is down about 12%.
2. Bankers: The Cockfighters of the 21st Century
Why this apparent vote of "no confidence"? Maybe it's because prior to his nomination as Treasury Secretary, Geithner was the the president and chief executive officer of the Federal Reserve Bank of New York, a position he had held since 2003.
Essentially, that means Geithner presided over the entire crucial final buildup stage to this debt crisis. That is not some kind of weird hyperbolic assertion. To this day the New York Fed, without a shred of irony or embarrassment, claims that it "supervises and regulates financial institutions and helps maintain the nation's payment systems." Yet, even by the lowered supervisory standards of an illegal Appalachian cockfighting ring, the New York Fed has failed at every aspect of this self-proclaimed mission.
Once the sport of Persian and Indian kings, cockfighters today are a backward people full of hate and cruelty. And like gamecocks, bankers possess almost a congenital aggression toward all members of their species. Just ask Lehman Brothers and Bear Stearns. That's why the comparison is so apt. That is also why, coming out of the New York Fed, Geithner must have seemed like a natural choice to head up the Treasury Department and preside over the grisly bloodsport that banking has become. Like cockfighting before it, I suspect that banking too is well on its way to being legislated virtually out of existence.
3. Now, It's a Crisis.
"For nearly a generation, the face of homelessness in America has been that of a man or woman living on the street and panhandling for loose change," the Washington Post reported Monday. "But with the foreclosure crisis, stagnant economy and rising unemployment, advocates for the homeless said they are seeing more two-parent families seeking shelter."
And then there was the following look at homelessness that appeared a week ago here: The Coming Crisis: White Collar Homelessness. "As unemployment becomes worse, community-based organizations are noticing a change in their clientele. Shelters are seeing clients who are more representative of the newly unemployed."
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