My new column is in the issue of Time with the large-eared-man on the cover and online here. It begins:
Over the past few months, we have heard banker after Wall Streeter after mortgage lender declare that market conditions are the worst since they got into the business. Some go even further. “The worst market crisis in 60 years,” pronounced investor George Soros. “The worst financial crisis since 1931,” declared a top German regulator. “We have not seen a nationwide decline in housing like this since the Great Depression,” said the CEO of Wells Fargo.
Not the best time, you might think, to sell shares in the biggest initial public offering (IPO) in Wall Street history. Especially not a financial IPO. Yet here we have credit-card giant Visa, now owned by its member banks, announcing plans to peddle up to 446 million shares of stock in late March for an expected take of between $15 billion and $19 billion.
Giant IPOS are usually a sign of good, or at least frothy, times. The current record haul for a U.S. IPO, $10.6 billion, was reaped by AT&T Wireless in April 2000–just after the great tech-stock bubble began to deflate but before anybody realized it. (The world-record holder is and apparently will remain the Industrial & Commercial Bank of China, which raised $21.6 billion in an IPO in 2006.)
What gives with Visa? One possibility is that the company and its investment bankers are deluded and the IPO will crash and burn–but the current thinking on the Street is that it won’t have trouble finding buyers. Another is that the financial types who’ve been crying crisis have been crying wolf. But the housing market is in its worst slump since the Depression. Some debt markets have completely stopped functioning. The overindebted American consumer is showing signs of great stress.Read more.
My point is that this may well be the worst financial crisis since the early 1930s, but that it is not anywhere near as bad as what happened in the early 1930s, when financial intermediation basically shut down for a couple of years. The difference is the Fed, which is doing whatever it can to keep the channels of credit open. So Visa can still do an IPO even amid the turmoil. And you can curse the Fed all you want, but it does seem to have learned something over the decades.
Of course, the IPO hasn’t happened yet and if the market keeps doing like it did Friday, it won’t happen.