By Nicholas Santiago on January 21st, 2010 3:38pm Eastern Time
The markets have sold off all day long as word leaked out that President Obama was going to implement new rules for the large banks. The President announced an outline of the new rules that he plans to put in place to limit the so called big banks, or as we would say 'too big to fail' banks from proprietary trading. Please realize this is how these banks have been making the bulk of their money. Today Goldman Sachs (NYSE:GS) reported earnings that were simply off the charts due to proprietary trading. Companies such as J.P. Morgan (NYSE:JPM), Morgan Stanley (NYSE:MS) and others all had huge trading profits as well. It is safe to say their money is not being made from lending or making loans. Since today's news was released the big bank stocks have literally plunged, dragging the rest of the market with it. On the flip side many regional banks have done well, such as New York Bank (NYSE: NYB), Sun Trust Bank (NYSE:STI), and Regions Financial (NYSE:RF).
This administration has been one of the most calculated and crafty administrations when it comes to the stock market. Please recognize that the President called the bottom in the market in early March 2009 by saying it looks like a good time to buy stocks. Just that statement alone makes a long time career trader, who has been around many phases of market history, and studied even more, shake my head. His working group must watch the stock market intra day more than I do, and I happen to trade for a living.
The point today is simple. The Obama administration is trying to put in some rules, other than calling the rules the Glass Steagall Act of 1933. The Glass Steagall act was put into effect to prevent another "Great Depression." The act states that commercial banks cannot engage in investment banking activities and authorized deposit insurance. In other words, everything that they do now, and have been involved in since 1995-1996 when the act was repealed under the Clinton administration. Why don't they just reinstall the act that seemed to work 72 years?
We have to chuckle today when Congressman Barney Frank made an appearance on our favorite cable business channel to say that the new rules would not be implemented for at least 3-5 years. This comment gave the market an immediate pop intra day. This administration is behaving like a fish out of water. They are flip flopping more than Senator John Kerry did in his run for President. Regardless of party lines this administration seems to just bow down to the big banks that are too fat to fail and seem to run the world. I say take a stand Obama, before your approval rating drops even further. The market does not care. It will survive. Remember the old saying, "as a President's approval rating goes, so goes the market."
Nicholas Santiago,
Chief Market Strategist
www.InTheMoneyStocks.com
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