What Saves Bernanke?

Cobra

 

In the last 18 months, the threat or an actual stock market crash seems to force Congress to do unpopular things.  In September 2008, after TARP failed to pass its first vote, the stock market crashed 777 DJIA points that day.  All that week everyone from Warren Buffett on down hyperventilated that failure to pass TARP would mean destruction in the financial markets.  A week later it passed.

 

In January 2009 it was learned that Tim Geithner had a “tax problem.”  Everyone from Warren Buffett on down hyperventilated that failure to approve Geithner would mean destruction for the financial markets.  Geithner passed Senate confirmation even though six other Obama nominees withdrew because of similar tax problems (including former Senate majority leader Tom Daschle).

 

Friday the stock market was down 220 DJIA points in part on fears that Bernanke might not get reappointed.  We disagree with this analysis.  We believe the market is down on fears the administration has no “plan B” if Bernanke goes down and it will take months for them to find a new Fed chief when the critical exit strategy needs to be formulated and implemented.  As noted above, Bernanke is not that popular so we do not believe it is about him.  It’s about consistency and continuity.  However, this might be a distinction without a difference.

 

Again everyone from Warren Buffett on down is hyperventilating that failure to approve Bernanke would mean destruction for the financial markets.  The question is if this threat and 220 DJIA point decline is enough to push Bernanke over the finish line.  Or, do the markets have to get significantly worse this week to scare the Senate into approving Bernanke?

 

Our guess is that Friday’s action is not enough as there are too many other cross currents between bank taxes, new banking rules (the “Volcker rule”) and the impact of the MA senate race to say last week’s decline was all about Bernanke.

 

In other words, if Bernanke does not pass, the markets get worse as the next Fed chief is months away and cannot be as dovish as “helicopter Ben” and his two trillion balance sheet.  If the markets do not get worse, Bernanke does not pass as the sense of urgency dissipates.

 

Unless Friday was enough to scare the Senate to approve Bernanke, and we do not believe it was, it seems like the Bernanke situation is near-term bearish.

6th-Sense

I think Ben will get "OK"

yaobooyao

我也觉得大本可以通过，不至于失业。

ppteam

wk, 老蛇现在也到ZH去看花边新闻

面包车

azure4068

什么时候能知道结果？？？？谢蛇神

ypm968

临阵换将乃兵家大忌

6th-Sense

Rep。只不过是想多搞点筹码而已。。。BEN 大爷最后好是无悬念OK。 花街弹冠一下。。。

临阵换将乃兵家大忌
ypm968 发表于 2010-1-24 19:54

oldpigwang

Bernanke's prospects appeared to brighten Sunday, with three more senators, including Republican leader Mitch McConnell of Kentucky, predicting he'll be confirmed. A vote is expected later this week.

michaelzhang

Cobra

wk, 老蛇现在也到ZH去看花边新闻
ppteam 发表于 2010-1-24 19:02

牛熊

lite1067

1) Mr.Ben has a separate 14yr term as Fed governor. So he won't leave Fed even if he is not reappointed.

2) According to the rule, if Ben Can't be reappointed by Jan/31, he will lose chairman position and his dear colleague Mr. Kohn (the vice chairman of Fed) will take over. Mr. Kohn is as dovish as Mr. Ben, just like Mr. Ben is as dovish as Mr. Greenspan.