The Market Needs Yellen

 | Oct 09, 2013 | 1:00 PM EDT
  • Comment
  • Print Print
  • Print
Stock quotes in this article:










Now that U.S. stock markets have come back from the abyss they were facing five years ago, it's very easy to point fingers, assign blame and even criticize Fed Chairman Ben Bernanke for printing too many greenbacks. Yet where was all that criticism five years ago when everyone was desperately seeking a lifeline?

In a recent interview in Bloomberg Businessweek, Michael Lewis, author of The Big Short, commented that the only justice that came out of the financial crisis was the failure of Lehman Brothers. In his view, allowing the likes of Goldman Sachs (GS) and Bank of America (BAC) to benefit from government assistance was the injustice. He recognizes that things would have gotten really bad if TARP wasn't created but feels we would have been better off without it in the end.

Lewis is brilliant, but I will respectfully disagree. Toxic credit wasn't only affecting banks but the likes of AIG (AIG), which insures hundreds of thousands of people as well as provides credit default insurance all over the economy. Businesses such as General Electric (GE) were going to be affected.

So Bernanke's actions, in my view, were more than warranted. Let's not forget that his predecessor Alan Greenspan was a big enabler of the housing bubble. Bernanke did not ask for an epic crisis; he inherited it. And he basically had no playbook; he had to create one. His moves have worked. And while there will likely be some consequences down the road, I don't think they will be as painful as those that would have occurred in 2008 had it not been for Bernanke, Hank Paulson and a few others.

Janet Yellen is a good transitional choice, and it was wise to go ahead and provide certainty, especially now, on who would fill the most powerful economic position in the entire world. While its public knowledge that Yellen supports quantitative-easing measures, her pending new role as chair of the Fed provides for an orderly changing of the guard. And that's exactly what the market needs right now as the uncertainty continues to grow with respect to when the government shutdown will be resolved and what will happen with respect to the debt ceiling.

Yellen's imminent appointment as Fed Chairwoman is surely no guarantee that the Fed will continue to buy bonds. Bernanke has three months to go, and the Fed could decide to slow down before January 2014. At the current juncture however, what Congress does in the coming days and weeks will dominate just about any other financial headline or market headline. In the meantime, let's hope that a Yellen confirmation goes smoothly and doesn't also become a negotiating chip.

Columnist Conversations

What ISN'T this company doing? Continues to dominate -- nice set of deals unveiled overnight.
The futures are up slightly this morning as traders buy yesterday's junk. As noted in last night's Strategy Se...
Equifax's (EFX) CEO is being replaced today in response to the data breach incident. Trading in the shares ...
TheStreet's Scott Gamm has Jordan Belfort on-camera today. Any questions you may have for the Wolf of Wall Str...



News Breaks

Powered by


Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data provided by Interactive Data. Company fundamental data provided by Morningstar. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by Interactive Data Managed Solutions.

TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

IDC calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.