Stock Market Pump and Dumb: Bernanke’s Hide and Seek Delaying Tactics
he ever changing model of nationalization took another leap towards a resolution of sorts today. Bernanke’s new plan amounts to a game of hide and seek, hoping the mess resolves itself over time. Please consider U.S. Will Take Bank ‘Ownership’ Stakes Only as Losses Climb.
The Treasury will buy convertible preferred stock as needed in the 19 largest U.S. banks after stress tests to determine how much capital is needed to address losses in a “worse” case scenario, Bernanke told lawmakers at a Senate Banking Committee hearing today. The shares will be converted to common only as the extraordinary losses happen, he said.
“It doesn’t have an ownership implication until such time as those losses which are forecast in the bad scenario actually occur,” the Fed chief said. Bernanke also said that the so- called stress tests that regulators will run on the 19 banks will look at potential losses over a two-year horizon if the economy worsens.
Bernanke’s remarks come after some investors expressed concern that the Treasury’s capital-injection plan would hurt banks’ shareholders and lead to government ownership stakes. The chairman added that it will be up to Treasury Secretary Timothy Geithner and the Obama administration to determine whether more bailout funds will be needed from Congress.
“How much more we’ll have to do depends on the state of the banks, it depends on how the economy evolves and it depends on the margin of safety we think we want to have,” Bernanke said today. He separately warned that “if we don’t stabilize the financial system, we’re going to founder for some time.”
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It’s always going to be a long back and forth between this concept of nationalization and necessity. Honestly, who are we to say what’s wrong or right at this stage?
I previewed this video today which shows the exact same debate between news sources.