It's A Deal
September 15, 2008
What's So Bad About That?
For all of its fireworks, Monday still didn’t feel like “it.”
The weekend brought stunning news, not just for Wall Street but really for anyone in this country who has used the financial system in any way, shape or form. So, the bank and brokers, along with the rest of the market, sold off.
But not in a way that leaves one gasping for air. Indeed, the first several hours of trade in New York on Monday weren’t unlike plenty of other days we’ve experienced of late. A 280-point pullback? Ho hum.
No, this certainly wasn’t the “blow off,” that frightening, when’s-it-going-to-stop pullback in the stock market that happens once in a decade or so and leaves market observers shaking in their expensive boots. I was unfortunate (fortunate?) enough to be around for a few of those knee knockers as a stock-market reporter, and what we saw Monday, contrary to what many folks were expecting coming into the session, looked like a slow summer Friday compared with the shellackings we took back during the Asian market crisis or in March of 2000, let alone back in 1987.
Now, a couple of caveats. For starters, the day’s not over, and these big selloffs will often make their presence felt most noticeably in the last hour or so of trading. Likewise, if we get out of Monday relatively unscathed, you can bet that the optimists will be out in force, surely a recipe for a bigger pullback tomorrow or later in the week.
But, perhaps the biggest thing to be wary of in this remarkable stretch is this: not much has been solved in the past 48 hours. Sure, the government has shown, to its credit, that not every I-bank is too big too fail, which is a good thing. If you want to argue the unfairness of helping out Bear and not Lehman there may be a case there (despite the avenues that were made available to Lehman and not to Bear), but the Fed and Treasury can’t step in every time things turn ugly.
But in terms of curing what ails them, I still don’t see how the Merrill buy erases billions in toxic loans, for Merrill, BofA or any other bank sitting on the garbage. It may inject some confidence--no small thing--but if that doesn’t hold, this odyssey will be far from over.
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