Saturday, October 23, 2010

Bernanke: Can you spare a little intellectual capital? Remember that certain banks were NOT allowed to fail for a reason...

Committing to a course is one thing, as unpopular much less intellectually bankrupt, as QE2 seems, explaining one's actions is quite another; sharing a little intellectual capital, information sharing would go a long to help all investors; both bonds and equity better understand, help plan, invest, act for the future. Connect the financial and capital markets, transmit the confidence so hoped for into action. In sum, sharing seems to be a wiser, more professional approach than the decades-old "signaling".

As is it stands now #1, the time horizon for many investors, emotionally at least, has shrunk virtually back to the "do not be long over the weekend".

And #2, certain banks which the Fed now oversees need to disclose any/all potential material known or knowable failures NOW in:
1- mortgage foreclosure filings,
2- mortgage modifications processes,
3- MBS trust initial securitizations and/or re-securitizations,
4- MBS put back resolution processes - as Wells Fargo leaked memo here states.
total exposure, reps and warranties, servicer and/or trustee exposure, insurance thereon.
5- Loss mitigation - as fiduciary to shareholders, including the obvious litigation steps, raises this issue: will certain potentially exposed banks, WHILE waiting for more "information from the warehouse," think to short MBS, buy CDS protection or short competitors stocks?

After all, these are the certain banks that were allowed to live. Please walk the talk and "serve communities and customers FIRST".

Concerns abound that the Fed is hiding something, more broadly there is widespread concern that although legal, unilateral, seemingly unaccountable actions paints the Fed armored with all sorts of authorities as if it's infallible - perceived almost above the law. Previous extraordinary programs, facilities, asset purchases, liquidity actions have ALL proved less than billed.

If the Fed shared more directly, unvarnished information like Face value of MBS on its balance sheet - could do much to accomplish what this writer pointed out in July 2007 and before. Cash infusions by the operators or sponsors, market rescues, liquidity by Federal Reserve Bank through discount rate cuts, extended rollover provisions, open market operations band aid liquidity only; Fed action does not cure the credit (creditworthiness) and or valuation issues of these "securities".

So come on Ben spare a little bit of that "perfect information".

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