A strong rumor was going through the markets on January 5th of a massive home refinancing program that would have affected US banks, and in particular, Bank of America. In fact, the rumor was so widespread that BAC stock rose 10% during the day, only to be halted in after-hours trading when the White House officially denied the rumor.
Looking for a reason why the surge of BAC has been abruptly halted after hours? Look no further - as predicted earlier, when we commented on the periodic reincarnation of the always false global refi rumor which served among other things to push BAC higher by almost 10%, the rumor was found to be false... all over again. In other words no refi, no benefit to TBTF, and all of today's gains are based on what Bloomberg noted was a report issued yesterday by a Jaret Seiberg, who until recently was an employee of MF Global, and has since been acquired with his entire Washington Research Group by none other than Guggenheim partners, which just happens to be run by former Bear Stearns exec Alan Scwhartz. From Bloomberg, here is the official denial (which came literally seconds after market close):
- White House Has No Plan for Mass Home Refinancing, Person Says
The stock markets, and in particular, the financial stocks, have been the beneficiaries of dozens of rumors throughout the fall and winter, only to have them denied within 24 hours by government officials or central bank authorities. As the Euro Zone crisis has escalated, rumors of agreements have hit the wires almost daily, and the stock markets have rallied on that news only to pull back near the end of a session, or in pre-market trading the next day.
For most of 2011, there has been little coming out of Washington in regards to helping the American people stem unemployment, or ease the ongoing housing crisis. In fact, a recent ruling by a state supreme court over MERS should accelerate foreclosures in 2012, and expand the housing problems affecting millions of Americans.
With the Federal government just days from reaching the debt ceiling once again, the chances of a new program to help homeowners seem unlikely as Congress and the President focus on elections going into 2012. Rarely are major changes or programs legislated in an election year, as Congressmen attempt to limit the amount of exposure voting on a bill would accrue to their records. And with yesterday's affirmation by the Obama administration that no new home refinancing programs are being planned for Americans in trouble, banks should expect much more pressure on their capital reserves as foreclosures once again occur in earnest throughout the new year.
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