Wednesday, May 13, 2009

Geithner: "Financial Markets Starting to Heal"

Treasury Secretary Timothy Geithner, before the Independent Community Bankers of America Washington Policy Summit, told bankers that the "financial markets are starting to heal".

Specifically, he pointed out that

- Spreads for investment grade corporate bonds have fallen about 210 basis points and spreads on high yield corporate bonds are down about 800 basis points since the end of November.

- Risk premiums in short-term inter-bank markets have fallen 275 basis points over roughly the same period, and the cost of credit protection for the largest U.S. banks has fallen by about 150 basis points just since early April.

- With the help of the Fed lending facility, new securities issuance has started to revive. Spreads for AAA credit card receivables ABS have fallen about 300 basis points from their peak.

- There has been more issuance of consumer asset-backed securities in the past two months than in the preceding five months combined.

- In the housing market, interest rates on 30-year mortgages have dropped to a historic low of 4.8%, and refinancing has surged.

These are all market data that Geithner pointed to. There is nothing here that we can dispute. Record money printing by the Fed with purchases of securities in government favored sectors of the economy, are clearly fueling a "recovery", albeit a money induced recovery that will ultimately lead to massive inflation.

3 comments:

  1. I dunno...If Geithner says the financial markets are starting to heal, that tells me he had a late-night phone call from Bernanke explaining they had 48 hours to stem another run on the banks.

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  2. The bankers actually gave Geithner a gift at the end of his remarks, for when he is stressed out. A tiny Bernanke squeeze doll.

    Of course, it would have been more realistic if they would have given Geithner a squeeze doll of a "taxpayer".

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  3. I can only imagine some big, fat old-timer Boss Tweed-look-alike banker coming up to TG afterward, clapping him so hard on the back he almost chokes and encouraging the little TreSec with a, "Hang in there, Timmy my boy, you're doing a fine job... the first murder is always the toughest one but soon you'll forget about it and kill with ease, as we all had to learn to do once upon a time..."

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