But the gain puts yesterday's sell-off in sharper relief. Sure earnings have been bad but today's earnings reports were bad too. Stock prices are going up today. Geithner did say something nice about bank capital today. But it was hardly an overarching statement about all banks. We know that some banks have enough/too much capital. But who are they? How many are there? Who is capital short? No word on them.
Markets rallied because they had sold off so much yesterday on bad earnings news as well as on fear of what Tim might have said today.
I didn't really think that Tim said very much. But that 's the point. Today was the dog that didn't bark.
It's not the end of the recovery. Stocks are not falling off the face of the earth. They just had a really bad day after a series of really good weeks. I'd say the weeks still have it, if 'it' is the trend.
We have been exploring trends in bank and market lending in various past cycles and we still do not see anything in this cycle that that says that the transition to recovery is in danger. That TARP banks may not be bastions for strong consumer lending -as the WSJ graphic showed on Monday of this week --should not be surprising. But when you plug a hole in a bucket you hope it will not lose the water that is in it rather than to hold more than it has. Tarp lending is a process and since it is occuring in a recession we must remember that the trend for lending growth in an ordinary recession is down not up. If TARP keeps lending from falling faster, or further, that might be enough.
The TARP is hard to evaluate. So far we'd call it a success, but it might turn out to be an expensive success.