Bank stocks tumble again after Obama's harsh words
President Obama tried to bolster the nation's confidence in his speech to Congress last night, but he had nothing good to say about the country's bankers.
That may have helped send bank stocks down sharply at the opening of trading. The BKX index of 24 big-bank shares fell as much as 7.6% early on. It was off 4.5% at about 9:30 a.m. PST.
The Treasury today is set to explain more about the "stress test" it will soon apply to major banks, to determine which may need more government capital. On Capitol Hill today, Federal Reserve Chairman Ben S. Bernanke again tried to downplay concerns that the government might take control of a large chunk of the banking system, saying the U.S. doesn’t plan “anything like” a nationalization of banks that would wipe out shareholders, according to Bloomberg News.
Bernanke sounded like the "good cop" after Obama's "bad cop" approach Tuesday night. Here's what Obama said about bankers in his speech:
I understand that on any given day, Wall Street may be more comforted by an approach that gives banks bailouts with no strings attached, and that holds nobody accountable for their reckless decisions. But such an approach won’t solve the problem. And our goal is to quicken the day when we restart lending to the American people and American business and end this crisis once and for all.
I intend to hold these banks fully accountable for the assistance they receive, and this time, they will have to clearly demonstrate how taxpayer dollars result in more lending for the American taxpayer. This time, CEOs won’t be able to use taxpayer money to pad their paychecks or buy fancy drapes or disappear on a private jet. Those days are over.
I understand that when the last administration asked this Congress to provide assistance for struggling banks, Democrats and Republicans alike were infuriated by the mismanagement and results that followed. So were the American taxpayers. So was I.
So I know how unpopular it is to be seen as helping banks right now, especially when everyone is suffering in part from their bad decisions. I promise you -- I get it.
But I also know that in a time of crisis, we cannot afford to govern out of anger, or yield to the politics of the moment. My job -- our job -- is to solve the problem. Our job is to govern with a sense of responsibility. I will not spend a single penny for the purpose of rewarding a single Wall Street executive, but I will do whatever it takes to help the small business that can’t pay its workers or the family that has saved and still can’t get a mortgage.
He may have said what the public wanted to hear, but is there anything in those comments that would make an investor want to buy, or hold, a bank stock? And if private investors stay away, guess who's going to own the banks?
-- Tom Petruno
Photo: President Obama addressing Congress on Tuesday. Credit: Saul Loeb / AFP Getty Images