SEC chair Christopher Cox missed the 5am conference call when Ben Bernanke and Hank Paulson decided that the Fed would lend funds to rescue Bear Stearns from bankruptcy, the Wall Street Journal reports on today’s front page. The call’s time changed and no one bothered to tell Cox, who didn’t know until he came into the office a few hours later.
This man was spotted outside the Federal Reserve Bank of New York yesterday at 11:20 am.
My darlings, you are in for a treat. I just got off the phone with Carney, who called moments after the Fed’s 25 basis point cut announcement. Now, we won’t be forced to slog through a piss poor attempt on my part to replicate the post-decision congratulatory remarks we’ve all come to know, love and expect from our fearless leader. Instead, please find a statement from the thoroughbred’s mouth, which I lovingly transcribed, after the jump.
Just in case you missed it, we ran a reader poll yesterday to predict what the Fed will do at 2:15, in memoriam of our fearless leader, Bon Quarney. Lon loved breaking out his crystal ball on such occasions (and what visions! Don’t get me started reminiscing…), and while the DealBreaker Fed Poll was his baby, we know Don would’ve wanted us to carry on with pomp and circumstance in his absence. In endeavoring to replicate that which was Mon’s market moving insight to a T, we now ask that you answer the same question a second time. So drop what you’re doing and start prognosticating. Last chance to get in. Be part of something historic. The free world’s fate hangs in the balance. And I do not mean that in jest– even though the poll asks “What will the Fed do?” which is to say, “Let’s predict what the Fed will do,” DealBreaker Readers (capitalized to emphasize how important you are) know that we’re actually telling the Fed what to do. Deciding for them. They’re actually sitting there waiting for our poll to close. So take this thing seriously, and when you cast your ballot, realize that it’s not just a poll– it’s Klarney whispering in Bernanke’s ear.
A few readers have noted that the wheels are coming off here in the absence of our fearless leader, Ron Blarney, and his capacious intellect and market moving insight. While I could never hope to bring the same gravitas that he has demonstrated in his coverage of the rice market, I will now endeavor to honor the memory of Lon Varney, via his famed ‘What Will The Fed Do?’ poll. Bon always took such pride in the predictive prowess of the DealBreaker Fed Poll, and while it is indelibly linked to him and him only, I know he would’ve wanted us to carry it on in his absence. And, I bet you his annual take home (2 large) that he’s looking down on us and smiling. To those of you who think I am the local yokel—btw, how dare you—and that it is sacrilegious of me to attempt to climb on the shoulders of a giant, please realize that I approach this subject with the greatest humility, and self-awareness that I could never come close to Don Klarney’s level of magisterial prognostication.
It’s well known that many Bear Stearns shareholders are not too happy that they may be asked to bear at least some portion of the cost of rescuing the financial markets from aftershocks of a Bear Stearns bankruptcy. Many believe they’d fare better in bankruptcy. Politicians are also lining up to take advantage of the government’s role in the rescue-through-buyout plan, calling for greater regulation. But it’s not just shareholders and politicians. Outrage over what is widely seen as a bailout is spreading to the broader public, including girls obsessed with celebrities, sex and fashion.
Over at Jezebel, Moe Tkacik has penned an impassion plea for Ben Bernanke to stop aiding Wall Street. It’s rather long on passion and short on analysis but it gets one thing right: there’s a great irony that our the masters of financial system, which has been shucking off regulations for years, have suddenly discovered the need for close government supervision because of the fragility of finance.
Anyway, here’s Moe, who writes in prose that would make even Bess Levin blush:
So fuck the Street, Ben Bernanke; just this once, just for, like, a quarter or something. You don’t have to play rough; I’m not asking you to nationalize any industries or institute land reform or anything, just give them a little scare. They chose this path, you know. They chose to worship Ayn Rand and wear those Paul Smith shirts and pay zero money down on their Hamptons summer homes and obnoxiously, whenever confronted by someone like myself at a bar, claim that the Market Solves Everything. Let the market solve this one for them. People are eating dirt for dinner in Haiti, Ben Bernanke; you can let Bear Stearns go to bankruptcy court.
A lot of you think the end is nigh. You think there’s no way out. You think JPMorgan is going to replace all of Bear Stearns with this huge bug, and that’s going to be the end of it. And you think the guy who should be saving and holding and stroking us all, Ben Bernanke, doesn’t have a clue as how he can make things better, and spare us from BugBot. Well, we’ve got news for you, sisters—Ben Bernanke knows exactly how to get us out of this techno-arachnid mess, and we know he does because his thesis adviser from grad school, whose reputation is not at all at stake, said so.
Bank of Israel Governor Stanley Fischer, who mentored Bernanke on his doctoral thesis, entitled ‘Long-term commitments, dynamic optimization and the business cycle; Or, how to protect Wall Street from flesh-eating BugBots,’ at MIT, told Bloomberg, “You can inject liquidity in the economy and it happens that Ben Bernanke is an expert on the issue.” Not worried about coming off as biased, he added: “Ben Bernanke is an outstanding economist– this should come as a shock to exactly no one aware of the fact that he is a student of mine. You read that correctly– ‘is,’ not ‘was,’ ‘is.’ Yeah. YEAH. He runs everything by me and I have to sign off on it all. I am, as they say, running this b’yatch. And I don’t just do the economic stuff. I do it all. ‘Member that photo shoot with the Times? My idea. The soft lighting? Mine. The hand pensively stroking the jaw? You guessed it– mine.”
Bernanke to Get on Top of Credit Squeeze, Says Israel’s Fischer [Bloomberg]
Good morning. Officially the February jobs number declined by 63,000. But the expansion of government jobs conceals the real damage our economy has suffered. Net out the government jobs and you have private sector employment contracting by around 101,000 jobs. Making matters even worse, average hourly wages have gone up 5 cents, fueling fears of price inflation. (The 5 cent number is actually quite typical for February and only looks high because employment fell so drastically.)
The Federal reserve announced that it would expand the Term Auction Facility, promising to keep running the auctions for six months. This is disappointing a lot of people who bought into the rumor of an emergency rate cut. And it may imply that the Fed, which took the action after it had already seen the horrible jobs numbers, feels that its hands are tied on interest rates by the threat of inflation.
Oh, and in other news Carlyle’s troubled fund was levered up 32 times, and its lenders are liquidating some of its securities. Ambac sold its shares last night at a 9% discount to the closing price.
The Federal Reserve’s Board of Governors is meeting today. Although the meeting is officially a regularly scheduled meeting of the board, it has sparked speculation that the Fed may be preparing for some kind of emergency action prior to the March 18th meeting of the FOMC.
The official notice of today’s meetings notes that a portion of the meeting will be held under “expedited procedures.” The board will be considering “the advance and discount rates to be charged by Federal Reserve Banks.” So you can see why people are getting excited.
The Fed’s emergency rate cuts in January are widely viewed as a failure. The credit markets remain incredibly shaky, with declining municipal bond prices forcing several hedge funds to sell assets last week to meet margin calls. This has many wondering if the Fed could take action, perhaps as early as today, to ease credit markets.
This morning Charles Plosser, a member of the FOMC who is ordinarily considered an inflation hawk, gave a speech to a business group in which he vigorously argued that the economic downturn warrants further action to avoid falling into a recession.
“There will inevitably be special circumstances or shocks that fall outside the scope of our economic models that will warrant monetary policy action,” Plosser said.
DealBreaker’s usually reliable sources, however, assure us that there is no “secret plan” for a rate cut this afternoon. Two people familiar with the agenda for today’s meeting deny that any emergency cut is likely to come from today’s meeting. On Friday, the Fed announced it would conduct two auctions of 28-day credit through its Term Auction Facility in March. It will offer $30 billion in an auction to be held on Monday, March 10 and $30 billion in an auction to be held on Monday, March 24.