TEXT OF INTERVIEW
Kai Ryssdal: Congress was back in session this week from its spring recess. Lawmakers are usually a good source of news. But once again the week belonged to the banks. They're making money now, or so the numbers would have us believe. And generally speaking Wall Street has been happier as a result. To help us do our Weekly Wrap of Wall Street and beyond we have Andy Brooks back. He's the Head of U.S. Equity Trading at T. Rowe Price in Baltimore. Heidi Moore is the lead writer for the Wall Street Journal's Deal Journal. Hello again to you both.
Heidi Moore: Good to talk to you, Kai.
Andy Brooks: Hi, Kai.
Ryssdal:Andy, since it's been a while since you and I have chatted, and I know you've been on since then, I haven't had a chance to pick your brain about the market these days. What are you thinking?
Brooks: Well, I think investor sentiment is greatly improved. You know, it's just a much better tone. I mean, you got a lot of stocks that have doubled off the bottom. Earnings are coming out and stocks are trading higher on reduced expectations. So it could be that, you know, the worst is behind us.
Ryssdal: All right, but what does it say when stocks are trading higher on reduced expectations? I mean, come on.
Brooks: Well, it means the bar's been set pretty low, and... right, right. Exactly right.
Ryssdal: Heidi, let me ask you about these stress tests. I mentioned them up at the top of the broadcast. The Fed came out today and said, you know, here's how we did these tests, and everybody did, you know, fine generally speaking. But anybody who did really badly, we're going to just keep on propping them up. Smart way to go?
Moore: Well, I think that is was a foreseeable conclusion from the beginning that they were going to have to do this. So it's not quite clear why they had to go through all the drama and the angst of proposing these stress tests and dragging the banks through them. And this is really what you could have predicted, right? That the Fed is saying that even if a bank has to raise money, it's not insolvent, and no one freak out and nobody move and nobody gets hurt. Well, we already knew that.
Ryssdal: Don't you think though that it was however poorly executed, a well-intentioned effort at transparency and helping us figure out what's going on? Or is that maybe not the case?
Moore: Well, I think it was probably well-intentioned. The question of whether there was any transparency is still open, because they haven't -- they're not really clarifying who's going to have to raise money and who's not. The worst thing that could happen to the federal government is that they create a differentiation between the nation's banks so that some banks look stronger than others. Because if you have that federal imprimatur supporting some banks as strong banks and some as weak, then really what you've done there is essentially put some banks out of business just because the Fed has said, "These guys need to raise money." That's why they're keeping this quiet. But it really fights against the whole issue of transparency and disclosure; investors are no more wise about where the banks stand.
Ryssdal: Investor guy, Andy Brooks, what do you think about these banks and what these results might tell us?
Brooks: I think the stress test is partially an effort to say, "Hey! We're trying to set some standards here and be careful with taxpayers money, and we're going to make sure that the investments we've made are good investments and we're husbanding resources." I do think it's hard to be fully transparent when it's very complicated and it's something brand new. The last thing the Fed or the government wants is a run on the bank and some, as Heidi said, some good housekeeping seal of approval that says "This is a good bank," and "This is a bad bank." They can't fund out everybody if they come to the window at the same time. So I hope from this we'll see a clearer description of what the requirements are for banks in order to be viewed as good banks. And I hope the banks will be given the opportunity to get there in a reasonable time frame.
Ryssdal: Let me try to put banks behind us for a second, because lord knows we've all heard more than we care to about banks lo these many months. Heidi, what are you looking for elsewhere in this economy that either is important and we're not paying attention to, or that might be a bright spot?
Moore: How the auto industry affects the banks. No...
Ryssdal: No, no, no. Bright spot!
Moore: Well, I think in terms of bright spots you have to be careful. We can't just sort of jump into this optimism a little too freely. There's so much going on. But I think, you know, you're seeing a lot of mergers and acquisitions in the pharmaceutical sector and in the technology sector. And you're also seeing more action in the capital markets. So companies are raising money through stock, through bonds, and that shows that things are moving again. At least we have some sort of economy going.
Ryssdal: Andy, what do you like?
Brooks: You know, I couldn't agree more with Heidi's comment about the credit markets. They're working. There've been a lot of deals that the REIT sector -- the real estate investment trust sector -- has raised a lot of money in the last couple weeks. Restaurant stocks have taken off significantly.
Ryssdal: Restaurant stocks? I thought we were not going out to eat because we're all so scared of spending money?
Brooks: Well, they've really been a good group. McDonald's is up some, but stocks like P.F. Chang's and Cheesecake and Chipotle have just been on fire the last couple weeks. So I think that might signify that the consumer's in better shape than we've given him credit for.
Ryssdal: Andy Brooks at T. Rowe Price. Heidi Moore at the Wall Street Journal. Thanks guys.
Moore: Thank you.
Brooks: Thanks, Kai.