Yesterday a team of banks announced that they will deposit $30 billion with Republic First Bank in an attempt to bolster confidence in what is quickly becoming a banking crisis. Likewise, the Swiss National Bank threw Credit Suisse a lifeline.
My immediate reaction was to remember a parallel from 1929.
On Thursday October 24, 1929 i.e. a few days before the infamous Crash of Black Monday, the stockmarket was getting pummeled. A few top bankers decided to stem the bloodbath by getting themselves physically on the floor of the NYSE and making a show of buying stocks: Charles Mitchell from First National City Bank, JP Morgan Jr., Thomas Lamont and Albert Wiggin from Morgan. Indeed, their show of confidence managed to stop the drop, stabilized prices and even created a rebound. But, it was all extremely short lived, as we know.
Why? Because then as now, fundamentals ALWAYS rule the day, eventually.
And Right After