Geithner Testifies, Banks Rally
Research for Online Investors

by John Dalt

4/21/09

USA Today reports that Freddie Mac said that 30-year fixed-rate mortgage rates fell to 4.82% last week.  Rates have now been below 5% for five consecutive weeks.

Turbo Tim Geithner appeared before the Congressional Oversight Panel this morning. The issue of banks repaying the TARP funds became murkier. Banks will be allowed to repay TARP if their regulator approves, and it does no damage to the U.S. credit system as a whole. This allows the government to keep their hands in the private banks. For the banks, it means they may not be allowed to repay the government and get out from under their control. It is not their decision. Traders saw something in Geithner’s testimony, as the market reversed and headed up after he spoke. As in the in the last six weeks, financials led the way higher. They were down pre-market and the first two hours then reversed to lead the market higher. It was the lack of news as opposed to any bad news that let the market regain its footing.  Turbo Tim did not stick his foot in his mouth.

Chrysler, Fiat, the UAW, and Treasury officials met in Washington today to work on a partnership that would give Fiat 20% of Chrysler for no money. This is now the rescue plan for this American car company; give it to a foreign car company. Fiat has stated they would not participate unless the UAW reduces wages.

Citi had their annual meeting this morning in New York City, shareholders expressed their anger. Vikram Pandit held onto his seat as CEO. The State of Connecticut Retirement Fund was demanding his removal along with various directors. Their view did not prevail. Pandit told the meeting that he wanted Citi to repay all government money. The government is going to convert preferred shares to common later this month, making Uncle Sam the largest shareholder. This will give Treasury a vote running the bank. Rumors are afloat that treasury will remove Pandit if Citi asks for more funds; they have received $45 billion so far. Citi posted net income of $1.6 billion in the first quarter. In a strange disclosure, Citi made $2.7 billion on a derivative position on its own debt. Simply put, Citi bet against itself, Citi debt was downgraded, and gained $2.7 billion. The cynic in me would point out how much Citi would be worth if it went bankrupt.

Did you see the headlines this weekend?  The EPA ruled greenhouse gases (carbon dioxide) a threat to the public health!  Does this mean I have to get a permit to breathe?

"In both magnitude and probability, climate change is an enormous problem. The greenhouse gases that are responsible for it endanger public health and welfare within the meaning of the Clean Air Act."

With that statement, we have entered an arena that allows the government to regulate us into servitude.  It is not just about car exhaust, or belching smokestacks.  It reminds me of Ronald Reagan’s quote of the most feared words in America, “I’m from the government, and I am here to help you.”

The cap and trade proposal is expected to generate between $500 billion and $1 trillion dollars a year.  This compared to total tax revenue in 2007 of $1.2 trillion.  Carbon legislation or regulation could DOUBLE the tax against the U.S. economy.  If the democrats and OH! Bama cannot get a carbon tax through congress; never fear the EPA will do it for them.  This will give them political cover as our costs for every type of energy will skyrocket, and they can blame the regulators, but do nothing about it.  Congress could legislate this power away from the EPA, but that will never be discussed.  Blue Dog  Democrats are starting to howl at the spending and liberal agenda leadership is pushing.  This pushback is dimming the chances of a carbon tax passing; elections have a way of punishing tax increases.  House members will be in election mode in less than a year, so they have an interest in not shooting themselves in the foot.

Coca Cola (KO) reported earning this morning.  They missed by over 10% on declining sales.  Their stock did not participate in the market gains today; it was down almost 3% If you are a long-term value investor, here is your opportunity.  Coca Cola is one of the great world brands, pays a nice dividend, and increases it regularly.  You will not get rich (unless you already are) but you will not go broke owning it either.

"He is from the government, he is here to help us"

Are you here to check the methane and carbon dioxide, again?

Beware the greedy hand of government, thrusting itself into every corner and crevice of industry.”   Thomas Paine

The information presented in this newsletter is based on generally available news releases, corporate filings, current events, interviews and the editor’s opinions.  It may contain errors and you should not make investment decisions based solely on what you believe you have read here.  Do your own research, it is your money.  If you lose it, it is your responsibility, not ours or your grandmothers!  The editor may or may not have a position in any securities discussed.  The editor may have held a position in a security earlier, or in the future.

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