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Mesirow Financial Chief Economist Diane Swonk and DMJ Advisors CEO David Jones on the state of U.S. banks and the Federal Reserve’s impact on the ec...
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-- -- -- -- -- -- financial also David Jones from DNJ.
Advisors.
-- thank you for being here very exciting day -- let me start -- you.
Are you at all concerned we've been very maybe not pollyannish but pretty optimistic here and it's hard not to be with over 200% gain in the Dow.
What about inflation -- is there any concern that things like gas prices could could blow out this recovery.
I'm certainly -- has more on the demand side from the Fed's perspective then name inflationary side they're willing to sort of write -- it's transitory and it could have a bigger effect on suppressing demand as we move into the spring especially we lose that offer of -- we have any heating bills this winter 'cause it was so warm it's going to be 78 here in Chicago tomorrow.
That was a -- -- big plus for consumers big offer on those higher energy prices.
I do think it's really important to note -- -- answer that Citi devil's advocate that are sort of that fly in the ointment that the Fed put your statement that nobody's talking about was they did say.
The housing market remains depressed and that's where they're most concerned.
Later in the year the mortgage backed security market these banks that got do their settlement that's one of the big things it's a big hurdle for the on the stress tests look -- they're gonna come out great.
But the real hurdle is mortgage processing capacity is -- down and the mortgage backed security market still dominated by Fannie and Freddie.
That market does not -- that it's gonna be as good at the end of the year debt combined with the sort of structural problems in the housing market.
Diminishes that that ability of the Fed to stimulate the housing David Johnson now let me ask do it there there's the sort of cold water thrown on a day like today but does that mean that names like a Wells Fargo -- Bank of America that has a lot of exposure.
To a distressed housing market that maybe there's a little too much optimism right now in these things.
Well there could be -- -- the Fed has really.
Supported the market extremely well pushing those long term rates down.
Forcing investors out into more risky assets like the stock market I think the -- -- supportive I don't see any more.
QE3.
Looking out at the months ahead I think they're just gonna take a wait and see view on the economy.
I just make two points one is for that stress test back in March 2009.
Was really the key to turning the market's upward after all that and dismal.
Effects of the credit crisis and I think.
This is really the second leg of those stress tests.
Our banking system has been well capitalized.
It's it's in great shape certainly much greater shape than we've seen in the case of the euros on banks and I think that's important to emphasize but I think the Fed will just simply say look we're on hold we're gonna keep rates at zero.
And support this gradual strengthening in the economy they David it's it's Charlie.
Gasparino -- and he can he make -- interesting point about the Fed.
Keeping rates at zero and pushing people out on the risk spectrum but isn't that a little bit of a little bit of worry here I mean people are buying stocks.
That our media buying investments not just stocks -- buy another vessel that's what the whole deal is here that it may be too risky.
And that you know this thing could you know one bad move -- -- Europe.
And the market goes down 500 points.
Well that's true Charlie but what I would emphasize is that.
Were really the best game in town -- -- US economy is at least gradually strengthening and our stock market has looked a lot better than.
Other markets what even.
As we look out to the emerging countries and certainly in Europe so our.
We're the best -- in town there's always a danger of getting ahead of ourselves and I do think -- -- analysis have been keeping.
There has been really lagging behind where the economy has been in the -- been more worried about the economy.
Certainly not have public for now at least I think that their days -- work that I.
