The New Sign Of The Times

Stocks ticked up as White House Press Secretary Robert Gibbs has thrown some cold water on the bank nationalization rumors by saying that the U.S. “will continue to have” a private banking

system. The bank dilemma. On the surface, there appears to be only two alternatives: zombie banks (where the government effectively controls the bank and there is no real equity for

shareholders) vs. nationalization. But is that the only alternative? The question is how to: —Value assets, and —Provide money to banks without dilution. Setting aside the asset valuation

question, the Obama administration seems to be working toward a way to provide more money to banks without dilution. To do that they need to create an instrument that would have the right to

convert to common in the future (say five years), but which could be bought out by the banks before it converts. So it seems that the plan is to preserve the preferreds, and avoid massive

dilution if more injections of capital are needed. Regardless of the zombies vs. nationalization question, there is plenty of grousing on the Street about how the administration—and

Congress—is handling the bank crisis: 1) Cram-down legislation makes everyone on the Street foam at the mouth; it will allow bankruptcy courts to force a breakup of a mortgage contract,

which most on the Street believe will result in higher mortgage rates; 2) Banks who take TARP money are not allowed to use the money to consolidate, even if that is what is necessary; 3)

Legislators are demanding that banks lend, even though their capital positions do not allow a big expansion of lending, and at any rate loan demand is way down. Two signs of the times: early

mall closings, and what traders are reading 1) What traders are reading: 10 reasons the market is in trouble: * The Sunday paper costs more than NEW YORK TIMES stock * The Citi ATM fee

costs more than CITI stock * The paper that a mortgage is written on costs more than FREDDIE MAC stock * A subscription to SIRIUS SATELLITE radio would cost more than Sirius stock * A gallon

of gas costs more than FORD stock * One ride costs more than SIX FLAGS stock * A bottle of soda costs more than JONES SODA stock * A 5 minute long distance phone call costs more than VONAGE

stock * A 5 stick pack of gum costs more than RITE-AID stock * The strawberries in a smoothie cost more than JAMBA JUICE 2) WESTFIELD GROUP, the owner of large shopping malls in Southern

California, announced plans to cut shopping hours at nearly all of its 55 malls starting March 1. Most will open 30 minutes later and close 30 minutes earlier. _____________________________

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