Markets Rise On Bernanke, Citi News
MICHELE NORRIS, host:
From NPR News, this is ALL THINGS CONSIDERED. I'm Michele Norris.
ROBERT SIEGEL, host:
And I'm Robert Siegel.
Wall Street investors smiled today for the first time in a long, long while. Some good news from Citigroup and other places helped push the major indexes up more than five percent.
NPR's John Ydstie joins us now to talk about that rare thing, John, a good day on the stock market.
JOHN YDSTIE: A nice day on Wall Street.
SIEGEL: I'd like you to begin by parsing this rather difficult notion. Good news from Citigroup, how is that?
YDSTIE: Well, Citigroup CEO Vikram Pandit sent a memo to Citigroup employees today saying, quote, "I am encouraged with the strength of our business so far in 2009." And that, quote, "We are profitable through the first two months of the year." Now, if it turns out Citigroup remains profitable through the rest of this month, it would have its first quarterly profit in more than a year. That's after posting over 37 and a half billion dollars in losses over the last five quarters. This is sort of the equivalent of the deathbed patient waking up and saying, hey, I feel fine.
(Soundbite of laughter)
SIEGEL: I'm not dead yet.
YDSTIE: I'm not dead yet. And as a result, investors drove Citigroup's battered shares up above 40 percent.
SIEGEL: But if your stock's been selling around a dollar, a buck 40 looks very good, but, obviously, that's not a sign that the market's out of the woods.
YDSTIE: You're right. It's clearly not. The markets had some one-day rallies and they fizzled, but analysts see a glimmer of hope here. Remember, it's been thought Citigroup might be a candidate for a government takeover. But this suggests some hope, and some evidence that the government's efforts might be bearing some fruit. Remember, this is not a great lending environment. But the Fed has made funds available to banks like Citigroup at rates next to nothing.
They could lend those funds out at significantly higher rates. And if you add those two things together you get bank profits. In fact, other banks, including Bank of America, J.P. Morgan, Chase, also, the other stocks pushed up substantially today.
SIEGEL: Okay. Now, the other factors that we're seeing behind today's good day on the market.
YDSTIE: Well, there was a comment from Congressman Barney Frank, who talked about restoring the uptick rule within a couple of weeks. That's a rule that makes it harder for short sellers to bet against stocks and investors like that. And then Fed Chairman Ben Bernanke made a comment investors seemed to like in a speech today. The speech outlined his thoughts on reforming the regulatory system to prevent future economic meltdowns.
Bernanke suggested some toughening of regulation generally. But he also suggested there might be some wiggle room in the application of mark-to-market accounting rules. These rules have been very controversial because they've required financial firm to mark down the value of those toxic mortgage-backed assets, which have led to huge losses and destabilized institutions like Citigroup.
Today, Bernanke suggested that regulators might be able to give guidance to firm on how to value those assets, suggesting the possibility of some leniency. So, add all this up and add that to the fact that the market was at 10-year lows, you got a really nice rally. We'll see if it lasts more than a day.
SIEGEL: Let's make sure we haven't buried the lead here: the Fed chair says there will be more regulation, and the market went up.
YDSTIE: Yeah, ironic isn't it? I guess, you know, five years ago they would've said, no, no, no, and the market would've tanked. Now they're saying, stop us before we overleverage again.
(Soundbite of laughter)
SIEGEL: Exactly. Thank you, John.
That's NPR's John Ydstie talking about today's big day on Wall Street.