The U.S. Treasuryâs bank-rescue plan wonât repair the financial system or revive credit markets, Bank of America Corp. strategist Richard Bernstein said as he recommended avoiding the industryâs shares.
Treasury Secretary Timothy Geithner pledged up to $2 trillion in government financing yesterday for programs aimed at spurring new lending and addressing mortgage assets that are difficult to value. The governmentâs prior measures to prop up financial institutions included backing $118 billion of Bank of America securities and injecting $45 billion into the Charlotte, North Carolina-based bank after it bought Merrill Lynch & Co.
âFinancial stocks are likely to be as toxic to portfolio performance as banksâ assets are to their balance sheets,â New York-based Bernstein wrote in a research note. They plunged yesterday, driving the Standard & Poorâs 500 Financials Index to an 11 percent drop, on skepticism the rescue package will work.
Bernstein said the government should increase deposit insurance, seize assets, shut âlargeâ banks and encourage takeovers.
âThe history of bubbles clearly shows that the significant consolidation of the financial sector is inevitable,â the strategist wrote. âThe latest Treasury program is simply another attempt to stymie the consolidation process.â
I think Bernstein doesn´t care about his job...
Treasury Secretary Timothy Geithner pledged up to $2 trillion in government financing yesterday for programs aimed at spurring new lending and addressing mortgage assets that are difficult to value. The governmentâs prior measures to prop up financial institutions included backing $118 billion of Bank of America securities and injecting $45 billion into the Charlotte, North Carolina-based bank after it bought Merrill Lynch & Co.
âFinancial stocks are likely to be as toxic to portfolio performance as banksâ assets are to their balance sheets,â New York-based Bernstein wrote in a research note. They plunged yesterday, driving the Standard & Poorâs 500 Financials Index to an 11 percent drop, on skepticism the rescue package will work.
Bernstein said the government should increase deposit insurance, seize assets, shut âlargeâ banks and encourage takeovers.
âThe history of bubbles clearly shows that the significant consolidation of the financial sector is inevitable,â the strategist wrote. âThe latest Treasury program is simply another attempt to stymie the consolidation process.â
I think Bernstein doesn´t care about his job...
