Posted on 01/30/2009 2:01:51 PM PST by EagleUSA
NEW YORK – Stocks slumped for a second straight day Friday as investors, already on edge about the worsening economy, were further rattled by a report that Washington's plans to help banks may have hit a snag.
The Dow Jones industrials dropped 4.5 percent over two sessions; broader stock indexes are down more than 5 percent since Wednesday.
Uncertainty about when the economy will improve has investors looking to Washington for answers. With the market particularly worried about the prospects of a big bank failure, investors have been hopeful that the government will soon release details of a wide-reaching plan to help banks rid themselves of their toxic assets. But a CNBC report late Friday cast doubt on the so-called 'bad bank' idea, citing an unnamed industry source as saying the plan has hit significant snags. The news sent stocks down sharply lower in late afternoon trading.
"People were hoping it was coming sooner rather than later," said Anton Schutz, portfolio manager of the Burnham Financial Industries Fund and the Burnham Financial Services Fund. "So many people were anticipating good announcements about the bad bank over the weekend, but now not expecting any good news."
Treasury Secretary Timothy Geithner was meeting Friday with top government officials to develop the administration's plan for overhauling the $700 billion bailout program and improve regulation of the financial system.
(Excerpt) Read more at news.yahoo.com ...
It’s because of ZERO!
1. CDS - Many bank assets are not actual mortgages, nor are they derivatives backed by mortgages. What they really are are synthetic (ie mimicking some index/asset class) derivatives backed by other synthetic derivatives. The non-exchange nature of these derivatives means that payment is wholly dependent on the counter-party's ability to pay. If one side blows up, the value of the asset is -0-.
3. Fiscal - The US Gov is running out of borrowing capacity to cover/bailout/nationalize bank losses expected to be anywhere from $4-6T and annual deficit spending in the range of $2.5T.
4. Monetary - The Fed has expanded the monetary base by some $2T over the last few months (aka "injecting liquidity") and is threatening to 'monetize' Treasuries (ie "print money" to buy them at auction) to cover any shortfalls of external buyers, like the Chinese, if they start leaving the market.
These 3 points: CDS, fiscal & monetary, are basically the root of the problem. TPTB tried & failed to stop the deflationary cycle caused by falling real estate prices by flooding the market with dollar reserves and promises to stimulate the economy.
What comes next after you lose a bet going "all in" is where it gets, shall we say, 'interesting'.
China saying they won’t buy any more US debt isn’t a good sign either. Not that I blame them.
obamas fault
Not sure we can quite say that yet. Pelosi’s fault? That we can say and actually back up with facts...
0 is crashing the market with his negativity. We are in desperate need of a Reagan, and instead we get a Mugabe wannabe. 0 is going to liberate the unions, by killing off their employers.
I’ve yet to meet a true Socialist who didn’t think Socialism has failed because government never spent enough to make it work. 0dummy is 100 percent invested into that idiotic thinking.
Obama’s fault.
Obama’s fault.
Obama’s fault.
Obama’s fault.
Repeat...
Obama’s fault.
Obama’s fault.
Obama’s fault.
Obama’s fault.
I’m not sure I would even bet on 4 years, considering that gang of thieves with whom he is surrounded...
No recovery until there is a job recovery. If people are not earning, they are not buying. The best way to prevent government spending is for corporate hiring. Corporations should be given tax cuts for job creation not bonuses.
i think you are far too optimistic.
No matter how bad you think it is, it is worse.
But you have a good start on it.
another hypothesis is the dems want everyone to be “middle class”
they will tank the market and the economy until every rich person is poor. Then they will be happy.
gosh i hate those #$%#*
Nah if it was good he would be taken the credit, so it his fault either way, pelosi is a buffoon
The media keeps dancing around the obvious - investors are worried about socialism. Period. This entire plunge started when the government decided to bail out a few select entities.
Once the printing presses start rolling, nobody will want to be holding US dollars either.
Once this temporary bottom falls out and the markets go into free fall, we are looking at a serious depression, and that will grip this country for a hell of a lot longer than 4 years. Like the last depression, we are going to see thousands of company's fold up or be bought up for mere peanuts. If we think our national debt is bad now (almost double if you add up ALL the trillions the government has spent lately) just wait till the government starts paying billions a day for the 25% unemployment that's just around the corner.
0bama’s fault
1) Porkulus bill
2) Plan to eliminate secret ballot with respect to union votes
I don't think China has said that. (?)
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