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Tuesday, April 14, 2009

The Fantasy Slows!

But Steve Moore of The Wall Street Journal said that while profit statements don't include taxpayer money, profits wouldn't exist at all if the government hadn't stepped in.
"You have banks that are reporting several billions of dollars in profit. These are the same companies that we poured tens of billions of dollars into. ... I think that these could be phony profits, people. I do not think a lot of these companies would be awarding the profits if we were not pouring our money into these banks," Moore said.
Bevins said it's more telling that the large banks have not returned the money yet.
"It would be a much more powerful statement to return the money than just say you will," he said.
Ely predicted that as more banks return bailout money, those that don't will be marked with a scarlet letter in the form of an "F" for failure.
"What's happened is the government has shot itself in the foot," he said.
Obama said Tuesday that the program has been essential, but his administration has been wrongly criticized for not intervening more into the workings of private lending firms.
"We believe that preemptive government takeovers are likely to end up costing taxpayers even more in the end, and because it is more likely to undermine than to create confidence. Governments should practice the same principle as doctors: first do no harm," he said.

This is the first I have seen of others debating the sudden surge in banks so-called profitability. And now even the Obama administration is lightening the rhetoric about the transition to recovery. They pushed the envelope as far as possible and now that the investing public has questions they are backing off the peddle. Even koolaid has its limits!

The coming weeks are going to tell a very interesting story. We will soon see how many lemings there are to race to the troth and whether the government is successful in selling their fantasy package. I dare say that main street is to smart to be duped a second time and this next rally wit hthe so-called stress tests will show limited results.