Michael Shulman

Weekend at Bernanke's

by Michael Shulman   07/24/08

After the weekend starting Friday, July 11, it seems like the folks at the Fed took a big cue from the silver screen in the form of emulating the movie "Weekend at Bernie's."

If you missed that 1989 classic, the quick-and-dirty is that Jonathan Silverman and Andrew McCarthy have to pretend that Bernie is alive to keep the hitmen at bay whom their boss had hired to take them out once Bernie left the house. But for as long as Bernie is still being seen with them, they are safe.

The same could be said of some major financial stocks, which dragged the markets into bearish territory late last week and are themselves being propped up by Fed intervention, or the promise thereof.

BIG 'MAC' ATTACK

Right after the closing bell, we found out for whom the bell tolled when California banking, mortgage and subprime-lending titan IndyMac (IDMC) bank rolled over and died.

The mortgage-heavy holding firm was taken over by the Federal Deposit Insurance Corp. (FDIC). It opened on time July 14 with federal officials at the helm who are making a lot less money than the previous management team.

The federal insurance system is three generations old. In that time, it has never lost a penny for insured shareholders, and it's comforting to know that the FDIC is doing its thing.

This kind of move is Fed action at its best -- that is, if you ignore that the run on IndyMac the week of July 7 that was prompted by a letter from Sen. Chuck Schumer (D-N.Y.) that broke the stock's freefall.

IndyMac hadn't been on the FDIC watch list. Whoops. But with so many banking giants toppling -- or at least, showing signs of wobbling -- the Fed is making its list and checking it twice … and adding at least two more names in the "to rescue" column.

A PAIN IN THE 'FANNIE'

But IndyMac's demise wasn't all the weekend had in store for the financial sector.