Three days ago, I wrote this in the comments section of this page:
“I think he [Bernanke] may have given the green light to the take-down trade when he said “no more rate cuts” in the Fed minutes.”
Bernanke’s tough-on-inflation speech this morning reinforced the sentiment from the FOMC minutes, and the possibility that the “Bernanke Put” had expired. The bears struck, driving Lehman’s stock down 10% on over five-times average volume. (The ironic thing is that they deployed a rumor that Lehman had sunk so low that they had to crawl to the Fed’s discount window.)
Is it a coincidence that this happened on the day that Obama pretty much sealed the nomination? The Fed’s role, until perhaps now, was to bail-out bankers and see to it that they lived cushy lives no matter how many trillions of dollars they have destroyed. But Bernanke needs to get re-appointed by the next president, and since the Republicans will certainly be punished for this recession, that next president just might have a populist mandate to crack heads on Wall Street. So perhaps Bernanke is just going with the political flow…
Bernanke might also be getting a little worried about his balance sheet. Maybe it would be easier to let the bears put a few banks to sleep so that they won’t keep begging him for loans.
All of this could just be a string of coincidences. We will find out for sure as the financial crisis rolls on.
Disclosure: I am short the banks via SKF, and taking Doug Kass’s money!
[...] I write, the expiration of the “Bernake Put” is being discussed on CNBC. I first broke this story a few days ago, and now Richmond Federal Reserve Bank President Jeffrey Lacker has put it bluntly [...]
[...] that the economy was growing and new jobs were being created. Not only is that preposterous, but as I speculated here a few days ago, it looks like the federal bureaucracy has defected to the Obama [...]