Rumors from Con Men

Today the markets broke support at the open and then rallied hard all day long on rumors -

Senator Chris Dodd (D - Conn) said (with a laugh no less) that Bank of America will not be nationalized
CNBC announced that "Marked to Market" will be outlawed by the SEC
Ken Lewis (Bank of America CEO) bought 200,000 shares of BAC stock

Let's break these rumors down

Chris Dodd
What the heck is the Head of the Senate Banking Committee doing talking with reporters about the fiscal health of one of the banks he is in charge of overseeing and regulating? Is he on the side of the public who elected him or the banks who financed his election campaigns?

This is the same professional who just a few months ago told us that an Insurance Company was going under and tanked Hartford's stock for 30% in one afternoon.

Today's Dodd soundbyte was nothing more than a politician trying to talk the markets up. The fact that Dodd can't get off of his can and take action to fix things and thinks he can talk stuff up leads me to believe that this economic crisis (depression) will be deeper and longer than many fear.

The politicians are simply too timid and corrupt to do what is required to fix the economy and the banking system. I wonder how much money BAC and its employees have contributed to Dodd over the years.

Wait, that's right, Dodd received over $21,000 in contributions from BAC and $70,000 from Countrywide (now owned by BAC) and also got a bribe from them in the form of a sweetheart mortgage (remember the "Friends of Angelo"). Dodd also got the most contributions from Freddie and Fannie ($133,900) of any US politician.

Dodd should be in jail. The Housing market legislation that he proposed and submitted in 2008 was written by BAC and has only cost the taxpayer over $700 billion so far. The media should be reminding the public every time he speaks that he is bought and paid for by BAC/Countrywide.

So, yeah, according to Dodd, BAC will not be nationalized. Who do you trust, the Big Boys who are selling BAC and all its Preferreds and Bonds with abandon or some crook who takes brides and robs the taxpayer of 3/4 a trillion dollars?

End Marked to Market Accounting
All the marked to market rule states is that you have to value your assets based upon what they would be worth if you tried to sell them today.

Eliminating Marked to Market will not make the positions on banks' balance sheets worth any more, it will just be the final nail in the coffin for trust in government and the banking system.

Banks aren't lending to one another because they know that all the other banks are insolvent, so they don't want to lend any money. A rule change will do nothing to change the fact that banks are insolvent. So, a rule change will also not cause banks to begin lending again to one another.

The next time you get a margin call, try this -

Tell your bank that you would like to use the prices on your statement from 12 months ago and if the bank uses those values to calculate your margin requirements, then you do not have to sell to raise capital to cover your debt and actually have a tremendous amount of equity. Then ask them for a loan on for all the excess collateral now available in your account.

It won't work for you in the Real World and it won't work for the banks. The markets know that the banks are insolvent and they will crush the bank stocks again after any bogus rally.

CNBC is now a shill for the US Treasury, leaking rumors at times when the markets are at or violating key technical levels. The leaks are designed to ignite short covering rallies and hold prices up for just a little bit longer. the problem is that the bounces are getting weaker and weaker. Gasparino is the key leaker.

Ken Lewis bought 200,000 shares of BAC today
He also bought 200,000 shares of BAC at $6 a few weeks ago and 86,000 shares at $23 in November.

I won't use Ken Lewis' stock purchases as a gauge for when to buy stock.