The Fed's Push for TARP Payback

The Federal Reserve wants higher stock prices. That's all I can think of when I see that it wants repayment plans into place for the big banks such as Bank of America (BAC - commentary - Trade Now), PNC (PNC - commentary - Trade Now), Citigroup (C - commentary - Trade Now), Fifth Third (FITB - commentary - Trade Now), Wells Fargo (WFC - commentary - Trade Now), Regions Financial (RF - commentary - Trade Now), SunTrust (STI - commentary - Trade Now) and KeyCorp (KEY - commentary - Trade Now), that haven't repaid the Troubled Asset Relief Program yet.

Why would these plans bring about higher prices?

Because with the exception of PNC, all of these banks act as if any minute there will be a gigantic offering and no one wants to get caught having bought some ahead of the offerings.

I can't blame them. These offerings have often gotten done down 20% from where they are announced but then once the deal is priced they fly.

With the overhang of the TARP, no one wants to take a chance that Wells Fargo, for example, is going to issue 25 million shares to get the job done the day after they buy it. So the buyers wait and the sellers don't sell because they figure they can just buy more or they believe the assurances that there will not be deals at these prices.

By getting the government out of the stocks, the companies will be trusted and their coffers can begin to build again.

They have been reluctant to do it in part because they think their stocks are too low. But that's a Mexican standoff. With the exception of PNC, which reported spectacular earnings, the earnings these other banks have put up aren't good enough to budge the sidelined bank investors.

But Treasury's insistence will chance all of that.

This group's been horrible now for months, even as residential real estate has improved in the hardest hit areas and many credit indicators have turned positive. One has to presume that it's the TARP money secondaries that have crushed the valuations.

ALL JIM CRAMER BLOG ENTRIES | POST A COMMENT | READ COMMENTS  

---

Jim Cramer is co-founder and chairman of TheStreet.com. He contributes daily market commentary for TheStreet.com's sites and serves as an adviser to the company's CEO. Outside contributing columnists for TheStreet.com and RealMoney.com, including Cramer, may, from time to time, write about stocks in which they have a position. In such cases, appropriate disclosure is made. To see his personal portfolio and find out what trades Cramer will make before he makes them, sign up for Action Alerts PLUS. Watch Cramer on "Mad Money" weeknights on CNBC. To order Cramer's newest book -- "Jim Cramer's Stay Mad for Life: Get Rich, Stay Rich (Make Your Kids Even Richer)," click here. Click here to order "Mad Money: Watch TV, Get Rich," click here to order "Real Money: Sane Investing in an Insane World," click here to get "You Got Screwed!" and click here for Cramer's autobiography, "Confessions of a Street Addict." While he cannot provide personalized investment advice or recommendations, he appreciates your feedback and invites you to send comments by clicking here.

TheStreet.com has a revenue-sharing relationship with Amazon.com under which it receives a portion of the revenue from Amazon.com purchases by customers directed there from TheStreet.com.