Stocks tumble after gov't unveils financial plan

[WriteDown]

Source: AP

NEW YORK (AP) -- Investors are frustrated with the government's latest bank bailout plan - and showing it by unloading stocks.

The major stock indexes fell more than 4 percent Tuesday, including the Dow Jones industrial average, which tumbled 382 points. Financial stocks led the market lower, a sign of how concerned Wall Street is about the government's ability to restore the health of the banking industry.

Traders and investors said the lack of specifics from Treasury Secretary Timothy Geithner on how the government will direct more than $1 trillion in public and private support was troubling.

The plan is aimed at restoring proper functioning to credit markets, which seized up over worries about bad debt after the September bankruptcy of Lehman Brothers Holdings Inc. The latest plan calls for a government-private sector partnership to help remove banks' soured assets from their books. It would also boost an effort to unclog the credit markets that govern loans to consumers and businesses.....

Read more: http://hosted.ap.org/dynamic/stories/W/WALL_STREET?SITE=TXDAM&SECTION=HOME&TEMPLATE=DEFAULT

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Luckily, I have no plans to open my 401K statement anytime soon.

[MrPerson]

1. How the fuck do they know?

[bemildred]

3. Indeed.

I've seen bigger drops than this with no bailout in sight. Why assume the bailout caused the drop?

[cosmicone]

2. Mainly because no private investor would

participate in buying the bad assets even with the government. There is no way to appraise how much the bad assets are worth individually, so why would anyone put money into bundled bad assets that one has no recourse on?

At least buying a foreclosure property gives one the option to foreclose or sell -- the securities created from bundled bad assets will be worthless at the get go.

[Turborama]

4. Stocks plunge as Timothy Geithner fudges detail of economic rescue

Source: The Times (UK)


Christine Seib

Financial stocks plummeted tonight as the markets reacted with horror to the Obama Administration's economic rescue plans.

Even as the Senate passed the $838 billion economic stimulus bill by 61-37 votes in favour, New York financial stocks fell by more than 7 per cent and the Dow Jones Industrial Average dropped 3.3 per cent to 7,997.52 points.

The Nasdaq fell 2.5 per cent and the S&P 500 2.2 per cent in midday trading, as investors expressed their scepticism that the White House can revive the banking system.

The collapse in confidence came after Timothy Geithner, the US Treasury Secretary, spoke about the long-awaited second phase of America’s financial bailout.

Critically he backed away from the widely-anticipated creation of a bad bank in which the Government would buy toxic assets from banks to boost their balance sheets.

Instead, Mr Geithner said that the Government would partner with the private sector to create an investment fund that would buy the assets. He said that the Government would initially spend $500 billion on this project but could expand the fund up to a value of $1 trillion but further details were sketchy.

Read more: http://business.timesonline.co.uk/tol/business/economics/article5704359.ece

[Pale Blue Dot]

5. It's worth noting that the Dow dropped 200 pts while Geithner spoke.

But it's dropped 100 more points since the stimulus bill passed.

They don't think this is going to work.

[DallasNE]

14. Geithner Seems Overwhelmned

What we don't yet know is whether it is too much too soon to be able to absorb, the complete lack of transparency with the first $350 billion, options that all suck or powerful bankers standing in the way. The entire market reaction is to Geighner's talk. Since the filibuster was defeated the bill was certain to pass. It didn't even need the 61 votes it got. We will see what additional details come out over the next couple of days or so. Things were left to rot for over a year so it will not turn around overnight.

[Winterblues]

19. If "they" knew so damn much we wouldn't be in this situation.

"they" have not had a very good record of late as to the correct way forward.."They" are about as credible as Republican blowhards..

[Mind_your_head]

23. Do you really think that these people cared about "how it all worked"...

what effect their actions had on people? You'd be quite wrong, I think. They were lost in their own little (expensive) bubble-world and they were just looking for "higher heights". It is/was all a game to them. They want to push it all to some limit....to see how far they can push it, just b/c they CAN.....and take some great profit along the way to keep the wife/kids happy and maintain 'respectability' at the country club.....

[Zynx]

20. Considering Wall Street's magnifcently awful predictive record, I am not concerned

about what they think.

[peace13]

6. None of this has happened by accident.

Don't bail them out. Let it ride until they are ready to play nice.

Edited to add that I don't think that Geithner will survive this. Too many loony rethugs who will not listen to a thing that he says because he didn't pay his taxes. That report comes from loony associates that I can't help but overhear.

[Fovea]

7. The glow in the dark bank was a good idea, IMO

because the assets would be real, if currently upside down.

Later, we would regain far more, I think than this half assed idea based on some sort of additional bootstrapping from investors who are scared way beyond shitless.

[eleny]

9. Yup, they only have just so many toes they can shoot off

Maybe they'll resort to holding their breath until their collective face turns blue.

No matter what, they lost control when McCain lost the election. They can hold out for only so long.

[proudAZdem]

8. Does Geithner know what he's doing?

If so, then why does it seem like he continues to grasp at anything that looks good.

Another thing, I thought Obama's administration was about placing checks and balances. If so, then why is Geithner for less oversight and less restrictions for banks receiving money? Does he not see how foolishly the banks and other orgs used OUR money last year? http://www.tv1.com/playlists/211

[kirby]

10. Why is this a bad thing?

Many large businesses have failed big time and screwed this country over. Their stock prices were valued based upon many levels of financial shenanigans. If those loopholes are tightened or business have to pay for part of the mess they created, rather than the Bush/Paulson 'No questions asked' bailout methodology, I would expect a market correction.

[BootinUp]

11. hyperbole in the press, very helpful.

Day traders reacting to Washington DC press conferences don't say much for what will happen tomorrow or the next day.

[peacetalksforall]

12. Anything that tightens up ruthless gambling concocted by know-it-all

narcisstic and greed filled schemers is OK with me.

I can't stand the idea of selling something you don't own from a distance.

And if cleaning out the current SEC seat holders is included, I'm for it.

THE PROBLEM IS THAT SCUM PIRATES DO NOT LIKE THE LIGHT OF TRANSPARENCY.

The drop today was probably honest investors, fund managers PLUS
the pirates at any level who have the power to influence a drop to help make a poltical point for a certain few.

Maybe some think they dan steal their way back to profits.

[KakistocracyHater]

13. The stock markets are SO EMOTIONAL,

pathetic! They should not be allowed to jump all over the place on mere uninformed guesses.

[PurityOfEssence]

21. Your point?

They are well-known for their herdlike manias. Whatever courses of action we take are going to have to factor this in when they're taken.

This is frightening, and I'm sorry for being snippy about it, but this is an oft-told dynamic. That's why this is going to be so hard. This is human nature, just as the irrational exuberance of the late nineties was.

The only way to counter great forces is with great forces, and an Administration seemingly bent on compromise and gentleness is prone to water down its solutions.

Somehow, the extreme jitteriness and selfish protectionism needs to be accomodated in whatever plans we enact and more importantly, in the way they're announced.

For a lifelong optimist, these are very disturbing times...

[MannyGoldstein]

15. If We Purchased The Toxic Securities, The Banks Would All Fail

I'll bet the problem is that if the toxic securities were purchased at actual market value, the prices would be so low that the banks would be obviously insolvent. On the other hand, until those toxic securities are made to go away, nobody will trust anyone else.

The only answer is to nationalize the banks.

[Lucky Luciano]

22. This is the big problem...the Treasury Dept and Fed cannot

actually buy the securities from the bank because the mark to market would cause realized losses that would indeed make the banks insolvent...this is the enormous conundrum that Paulson faced....so he just injected money into the banks to avoid this...now Geithner is facing this issue and does not know what to do because nationalization is off the table....for now.

[demoborn47]

16. Wall Street a barometer? I don't think so.

Wasn't it their judgement that got us here in the first place? Signs that the stimulus is working won't be evident for months, possibly years.

[Idealism]

17. You should be happy when the market tanks

It means other people realize that our system is fucked up. The stock market only goes up when businesses make more profits than estimated. They do this by outsourcing jobs, not paying COLA adjustments to employees, and not providing affordable benefits. It isn't a good thing for the average American. Hopefully there will be large reforms.

[dmosh42]

18. Not a bad deal, having the financials putting up something..

They would love for the taxpayers to pay for all of the bad investments, while they stow away their stash.(the banks) They fucked up and should shoulder some of the lifting.

[whosinpower]

24. From the article it says

That the plan is aimed at restoring normal credit markets. That was why they gave the banks 350 billion no questions asked - and instead of loaning the money - as they morally should have - they threw that money right back into the FED. The FED's reserve is bloated right now - so much that the interest on bonds is essentially zero.

If it is up to government to "restore" the health of the financial industry - then Government should OWN those banks. Nationalize them. Fire every single executive and start over. And while your at it - fire everyone at the SEC - those who did NOTHING while this crisis brewed, and rated those securities under false pretenses.

If the financial industry is an essential service, as we have been led to believe, then it is time to get it out of private hands. This is war - and right now, the banksters are winning, concession after concession - give us money because we have toxic assets - OK. Give us more money so we can loan it out - OK. Guarentee these toxic assets so we can use them as collateral - OK. They did not loan out the money that the taxpayer already gave them - they rolled it right back into the FEDERAL reserve. Wait......I just had a horrific realization.

I am no economist by any stretch, but a recent article reminds me of something......there was a run on the banks/dollar that really frightened Paulson - I mean frightened him enough that he fell to his knees and begged for help from Pelosi. (September 18 - the day the world almost came to an end - I think the article was titled something like that) Throwing tons of money right back into the Reserve maintains an illusion that the value of the US greenback is good and stable, compared with other currencies. Perhaps they had to put that currency back into the FED - or else the run on the dollar would obliterate the US greenback - and the crisis we see now is a pebble compared to the mountain of trouble facing if the US dollar - the global reserve currency collapses finally under the weight of 49 trillion in overall debt.

If you don't think this is a war of sorts, then I have a bridge to sell you. Does Obama realize it, and does he know who the players are? Are we being led along the garden path to eventually embrace a North American currency and have the US dollar, the Canadian dollar and the Mexican peso - obsolite????