A WALK IN THE SUN

One of the greatest WW II movies (later ripped off to a fair thee well by Saving Private Ryan) was the magnificently casted film "A Walk in the Sun." In it is the classically cynical American G.I. brilliantly played by Richard Conte whose showcase line was, "Nobody Dies." Watching The Chairman on Sixty Minutes last night I continually returned to that line; "Nobody Dies." The Chairman was remarkably upbeat; one could almost see the green shoots emerging from beneath his feet in the form of the rebirth of the American economy which will hide the blood from all vision. Nobody dies.

Conte; "I am going to cut that farmhouse in half."

Loader: "If the ammo holds out."

Conte; "It had better hold out."

The Fed's ammo had better hold out as it became clear that the U.S. is going to find itself pretty much alone after the results of the G20 meeting this past weekend are tabulated. Not only are the Europeans not on the same page as the U.S. it would appear that they are not on the same page with one another. There are the Richard Contes among us who always questioned whether a group of nations whose constant efforts over the past 900 years or so were directed to the destruction of each other, could at some point come together in a political union that might force one or two of them to take a bullet to help out historical enemies. The answer seems to be not yet and to continue along the WW II theme, to take a bullet for good old Uncle was probably always A Bridge Too Far. Yet, fair try by our Hero, Tim and the reaction was at least civil. The Brits appear to be on our side (more or less--no difference there) and the Volk had made it quite clear that Ms. Merkel was to be on a short leash. The Euros tend to get a touch nervous when the Germans get stroppy. There is always the thought that in the back of the closet hangs Grandpa's fetching gray uniform. Oh well.

The Chairman did say one remarkable thing, however; he took zero off the table and bank equity investors reacting by bidding up bank shares today as though nobody would die. I think they are right but it is now clearly on the shoulders of the Fed to grasp the reins of the restructuring of the system whose future well-being the Chairman essentially guaranteed. To me, that is the best development we have witnessed in weeks because if the Fed with the resources at its disposal leads, the outcome may well be better than feared should the politics-first Treasury have grasped the mandate.

Surely, there will be a tremendous effort on the part of Congress to interfere with the restructuring of the system and it might well be argued that with the taxpayers' monies at risk the politicians should certainly be involved. They will certainly wish to create legislation that will increase oversight and control of the financial system. Nothing can be done to stop that effort and indeed, in some area more and certainly better regulation is needed. I always seem to get in trouble when I state that give me any new regulation and with 3 bright MBAs and a really good lawyer I can get around it in 72 hours if the price is right. I don't mean by breaking laws; I simply mean that in my 30 years in the business I have never seen a bullet-proof piece of legislation yet. We will not solve the problems we have uncovered by allowing Congress to convince us that it has the answers; it does not. More critically, if the upcoming legislative sessions are to be conducted in the confrontational, adversarial environment we witness today, what will result will be a disaster. Sadly, there aren't five legislators in either body that have any clue of what the business we call banking entails in the modern era. It is also critically important that before the politicians get to the point of working their craft that the crisis management approach of dealing with our banking sector give way to a reasoned understanding of where the problems lie and clear, understandable and reasoned cures be put in place and that those be clearly disseminated to the public. This is extremely important for as a result of ignorance, fanciful and dangerous solutions have gained traction for which there was no reason. "Nationalize the Banks" has been one of the greatest calls, supported by a whole host of those who should know better, the latest being former Secretary of the Treasury, James Baker. "We don't want zombie banks like Japan." We don't want to lose a generation!"" Dumb and dumber. Think about the role played by Japanese banks c.1990 and the role played by our institutions today. Compare the two and the role played by the MOF. More later this week and remember, "Nobody Dies."