Bears, Bulls, Chickens and Pigs: wOw’s Wall Street Weekly with Liz Peek (Week of 1/19) 

Editor’s Note: Liz Peek is a financial columnist and the author of wOw’s SHEconomics. 

What a week! We have a new president who had, as I count it, exactly two days of honeymoon before the yappers got busy. Paul Krugman, who must be feeling sort of empty now that President Bush has gone off to Crawford, has already started whining about President Obama. He didn’t like his Inauguration speech, because Obama didn’t rail about greedy Wall Streeters and promise universal health care. To Mr. Krugman, that was a grievous sin of omission. That Mr. Obama dared to suggest that the current economic meltdown was due to “our collective failure to make hard choices and prepare the nation for a new age” rankled Mr. Krugman, who professed to have no idea what he was talking about.

I’m not sure I know either, but I do think that the financial mess we are in emerged from a number of sources, including Congress’ insistence on broadening home ownership to people who couldn’t afford homes. That impetus led to bad choices all around, which were quickly magnified by the wizards of Wall Street, who concocted ways of temporarily submerging bad debts into even worse securities. 

Krugman’s real complaint is that Obama’s economic message sounds like “business as usual.” Here’s a secret: This stuff isn’t easy. Waving a magic wand to fund health care or to make bad debts disappear is a lot easier in print than in reality. The standard big-government fixes cost money, and right now the nation’s coffers are not exactly teeming.

It’s not only the pundits who have started to whine. The market fell like a stone Tuesday while millions on the Washington Mall cheered on the new commander in chief. The Dow Jones tumbled more than 4% – the worst Inauguration-day performance ever. Once again, we have the banks to thank for the collapse. As the financials report their fourth-quarter results, investors are being reminded once again just how much their balance sheets resemble Swiss cheese. Huge write-downs, mandated in part by a controversial accounting regulation that makes financials mark their portfolios to market values, continue to undermine confidence in the sector.

Meanwhile, some of the giant banks appear in disarray. Citigroup announced this week that it may split itself in half, and also tossed out their chairman, Win Bischoff, replacing him with Richard Parsons. Dick Parsons is a terrific fellow, but his appointment to this position isn’t terribly inspiring. He was the fellow who managed Time Warner through a difficult time, but he was also part of the team that created that unwieldy enterprise. He has been on the board of Citi since 1995; on the one hand that makes him knowledgeable about the bank’s problems, but you could also argue that, like Bob Rubin, he’s had a hand in creating this monster. Some commentators have noted that Parsons is close to Obama; since banking today may rely more on Beltway Rolodexes than on loan officers, that connection may top all else.

Citi isn’t the only bank looking unstable. Ken Lewis dumped John Thain overboard yesterday, after it became clear that Merrill had brought not only the thundering herd to Bank of America, but a whopping amount of bad assets as well.