Ben Bernanke today suggested adjusting the accounting rules in some way. From Marketwatch.com:

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Federal Reserve Chairman Ben Bernanke on Tuesday argued that regulators should make some improvements to controversial mark-to-market accounting rules at the same time as lawmakers create a systemic risk regulator that will fill in ‘shocking gaps’ in regulatory oversight.

“We all acknowledge that in periods like this when some markets don’t exist or are highly illiquid that the numbers that come out can be misleading or not informative,” Bernanke said at a Council on Foreign Relations event in Washington. “We need to provide more guidance to financial institutions about what are reasonable ways to address the valuation of assets that are traded at all in highly problematic markets.”

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“Further review of accounting standards governing valuation and loss provisioning would be useful, and might result in modifications to the accounting rules that reduce their pro-cyclical effects without compromising the goals of disclosure and transparency,” he said.

In a question-and-answer session after the speech, Mr. Bernanke said he did not favor a suspension of the mark-to-market accounting standards, but said that the weakness in current rules should be identified and corrected.

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Dow 30 were up nearly 400 points — despite WSJ story reporting that Citi and the Gov are talking again about support and suggesting to me that Citi may be under water by the Ides of March. Or St Paddy’s Day.

Here is a good overview of the argument for nationalizing the big wounded banks before they become Zombies (technical term now in common usage) like the Japanese banks of the 90s.

And .

Let Them Eat Fudge

Geithner on the Hill, trying to placate the Congressmen. But supplying nothing more in the way or numbers or detail.

The Dow was up 50 points on low volume, after down almost 400 yesterday. My best guess is still that stocks are going down for a while. But …

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Last Friday, I jokingly made the comment that perhaps the best thing for the market would be if we delayed the actual bank bailout details so we could continue to rally on hope for a magical solution.

Unfortunately, even though we still haven’t received any details, the market is no longer nearly as optimistic.

It now looks like we are doomed to months of rumors about what the “real” bailout plan will be. That may be good for some spikes of hope like we saw last week on talk of ending mark-to-market, but it’s going to keep an undercurrent of uncertainty in place and make it much tougher for the market to put together a good bear market rally.

With the news of both the stimulus bill and bank bailout now behind us, the big problem is that we still have so little clarity. The market always hates uncertainty and, despite all these monumental governmental plans, we have even more.

The market is very confused here and we are stuck back in the middle of the recent trading range.

The good news is that we are still holding above the January lows. The bad news is that we are moving closer to testing them and the chances of holding are declining.

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IMHO it seems we will now have to wait months, perhaps a year, for Geithner’s regurgitation of the MLEC to flounder and fail, before the notion of relieving the banks by suspending mark-to-market again gets a serious airing.

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It’s an UltraShort Financials ProShares bonanza!  And why not?

Over and over again I have tried to tell people that what happened with the banks in the last year was all Tim Geithner. He has managed to buffalo everyone into thinking that he is a genius and a loved figure, He has let it be known that when things went wrong, it was Hank Paulson’s fault. He has made it clear that the reason we aren’t out of this morass is because he hasn’t had his time.

Now, of course, everyone is discovering that it was Geithner all along. Public/private. Are you kidding me? Do you think there is enough money, even with financing, to make a dent on Citigroup’s (C – commentary – Cramer’s Take) structured investment vehicles, let alone the banking system? Does it matter that he will make “a trillion” dollars available?

Now, what the market wanted to see was, “We will give the banks the capital that they need to make it through this, we will certify that they have the capital, and they will give us a note back, saying they will pay us back.” True equity capital. If you have to come back more than once, we will break you up and sell you.

Nah. More facilities. More trusts. More piecemeal. More, well, Geithner, complete with the daily leaks right up into this and the heavy press-courting that has been his style from day one.

I am embarrassed by the “press” that made us believe in this Geithner. I am sure they will still defend him. Because he knows how to get the defense.

We are all about muddling through and “We will be tough on exec pay” and “Here’s a brand-new term auction rate private guarantee term program” that is the same as we had before, but we added a couple of zeros.

I know the apologists will say, “New! Different!”

Yeah, like New Tide.

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The bailout speech pointed out a final destination without offering a map. …

Geithner needed to speak to Wall Street, where the problems lie, rather than stay at a distance. He left Wall Street with too few details and no roadmap …

This is not to say that the framework isn’t good — it is, largely because it relies upon the Federal Reserve’s balance sheet and will eventually help to corral bad assets.

But there is a major difference between providing a framework and final destination and the details that are needed to reach that final destination.

What is missing?

Let’s start with the TALF, or should we say the elusive TALF. The Fed announced the program in November and it remains at the launch pad awaiting takeoff. The Fed today said that it would announce the date when the TALF would commence.

In other words, whereas expectations previously were that the TALF would be implemented in February, the Fed said today it would only announce the date it would commence.

Missing also from the TALF announcement is the details of it, with market participants still unsure of how it will work.

What else is missing?

How about the oldest question of all: How will the Treasury and the financial markets price bad assets? It remains extremely uncertain, along with how the Treasury will entice investors to do something they have been avoiding since the start of the crisis.

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Tony’s last paragraph speaks to my main whine — the need to revoke MTM and have the feds provide the Mark models — as opposed to Geithner’s prime tool, his re-tooling of the Paulson MLEC which relies on the banks themselves to buy up the assets (in a sense from each other?!?) with “encouragement” from the feds.

The heart of the matter: A shocking lack of political will by the new administration. The banks won this battle. Geithner is their man. Nothing is going to Change anytime soon. Banks are going to continue to fail, jobs get lost and housing to flounder.

Geithner’s first comment, when asked why the stock markets tanked on the speech: It is a massive undertaking and will take time to enact.

Take Time?! You are out of time. You have been there since before the beginning. You have been the number two man at the Fed since before the beginning. You have been working on this since the beginning.

Geithner did not announce a single active policy or program today. He announced a collection of old ideas intended to become policy. SOmeday soon, no doubt — at least some of them.

What the fuck ever happened to the Fierce Urgency of Now?

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Geithner’s plan wreaks of quasi gov’t/hedge fund abuse. Wasn’t that the big problem with Fannie and Freddie?

He has now created the Superfund/Specialist Fund that Hank Paulson always wanted.

There are two fundamental ways to fix our banking problems, the first is to artificially create a market for fur coats in August which is what Geithner just did, this solution is incredibly complex and costs a lot of money.

The second is to replace the mark to market pricing mechanism with a cash flow pricing mechanism. This solution is very simple and costs no money.

Geithner missed the message that the market sent him last week when rumors hit that he was considering repealing mark to market. Too bad.

Who would ever invest in a financial before a stress test? Geithner just created more questions than answers. Uncertainty abounds. We are flooded with uncertainty. Time to short banks. Is Geithner out of his mind?

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