From his blog:
Two weekends ago the big news was the one-year anniversary of the Lehman Brothers bankruptcy and the ensuing panic. But when you look at the data, the real one-year anniversary of the panic is closer to now.
Ed Yardeni and mark-to-market accounting:
Do you recall “Time of the Season” sung by The Zombies in 1968? The Q3 earnings season is about to start. For the third quarter in a row, there will be fewer zombies in the S&P 500. These were the living dead companies that finally died during 2008, or they survived and are mostly coming back from the dead. Many of them are in the Financials sector. They could deliver some big positive earnings surprises during Q3 thanks to the suspension of mark-to-market accounting on April 2. … The Doomsters were quick to add up all the write-offs they projected as the financial crisis intensified largely as a result of the death spiral attributable to marking the value of assets into the oblivion of extremely illiquid or nonexistent markets. It was insane that the MTM rule wasn’t suspended sooner. Yet both Ben Bernanke and Hank Paulson insisted that it would be unwise to change the rule in the midst of a crisis. They were dead wrong as evidenced by the extraordinary rebound in the stock market ever since March 12, when Rep. Gary Ackerman, my Congressman, leaned on Robert Herz, the head of FASB, to suspend the rule, which is what he did on April 2. The grand total of all the write-offs attributable to the financial crisis is now likely to fall quickly.
If not for unprecedented actions by the Ben Bernanke-led Federal Reserve, the United States economy might be mired in a depression.
Arthur Levitt, former chairman of the SEC, wants a systemic risk regulator who can serve as an “early warning system” and “director appropriate regulatory agencies to implement action.” (This is his House Fin Serv testimony.) I am not sure, ultimately, even the WH thinks this kind of prescience is possible. Anyone who could do that should be running money rather than serving in government. Better to tweak capital and leverage rules and force the big banks to show how they could be unwound — the “living will” idea.
It was a revealing performance that Treasury Secretary Timothy Geithner gave on Wednesday before the House Financial Services Committee. and an important one. While Geithner frequently journeys to Capitol Hill, his latest appearance comes as the administration begins a new renews a push for passage of sweeping financial regulatory reform.
Well, this is going to be fun. Chris Dodd is headed toward a tough reelection campaign. So he stays at the head of the Banking commitee instead of moving to Health since a) that is where the action will be in 2010 and b) it is a great place to raise tons of money. He wants a non-Fed superregulator while the WH wants the Fed in that role. And now the Blue Dogs are cooking up their own reform plan. The whole thing will be at the epicenter of a white-hot lobbying campaign. And then there are the personalities; Dodd, Frank, Bair, Bernanke, Geithner. The politics are every bit as treacherous as those of healthcare.