Sachinism Posted September 29, 2008 Posted September 29, 2008 NEW YORK - Fear swept across the financial markets Monday, sending the Dow Jones industrials down as much as 705 points, after the government's financial bailout package failed to survive a vote in the House. NYSE, NASDAQ As the vote was shown on TV, stocks plunged and investors fled to the safety of the credit markets, worrying that the financial system would now keep sinking under the weight of failed mortgage debt. "Clearly something needs to be done, and the market dropping 400 points in 10 minutes is telling you that," said Chris Johnson president of Johnson Research Group. "This isn't a market for the timid." While investors had some worries that the vote would be close, many on Wall Street appeared to believe it would ultimately pass. The proposal wasn't been seen on the Street as a panacea for the deepening problems in the financial sector that have led to the failure of Lehman Brothers Holdings Inc. and Washington Mutual Inc. and the forced sale of Merrill Lynch & Co. and Wachovia Corp. - and that still pose a threat to many other banks. The markets turned highly volatile as it became clear the measure wouldn't find the necessary support. The Dow regained ground then fell back again, trading down 524.88, or 4.71 percent, to 10,618.25. At its low, it was down 705.06, not far from its previous record Advertisement for an intraday drop, 721.56, set during the first trading day after the Sept. 11, 2001, terror attacks. Still, in percentage terms, the decline remained well below the more than 20 percent drops seen on Black Monday of October 1987 and the Depression. Broader stock indicators also tumbled. The Standard & Poor's 500 index declined 74.52, or 6.14 percent, to 1,138.75, and the Nasdaq composite index fell 139.00, or 6.37 percent, to 2,204.34. The Federal Reserve declined to comment on the market's decline. With Wall Street in turmoil, the yield on the 3-month Treasury bill fell to 0.32 percent from 0.87 percent on Friday. That showed that investors were prepared to get meager returns on an investment as long as it was secure. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.69 percent from 3.84 percent late Thursday. Investors also faced other worries about the banking system. Wachovia became the latest big bank to be rescued from its overwhelming bad mortgage debt, agreeing to a Federal Deposit Insurance Corp.-brokered buyout of its banking operations by Citigroup Inc. Marc Pado, U.S. market strategist at Cantor Fitzgerald, said investors are worried about the spread of troubles beyond banks in the U.S. to Europe and other markets. "Things are dying and breaking apart while they sit there and vote on this thing," he said. The dollar fell against other major currencies, while gold prices rose. Light, sweet crude fell $11.39 to $95.50 on the New York Mercantile Exchange as investors feared that a worsening economy would slice into energy demand. If the decline held, it would be oil's largest ever one-day drop. Marc Pado, U.S. market strategist at Cantor Fitzgerald, said investors are worried about the spread of troubles beyond banks in the U.S. to Europe and other markets. "Things are dying and breaking apart while they sit there and vote on this thing," he said. Lawmakers voted down a plan that was different than what the Bush administration had originally proposed. There were restrictions allowing Congress to limit how much of the money goes out the door at once. It also included caps on pay packages of top executives as well as assurances that the government also would ultimately be reimbursed by the companies for any losses. The Treasury would have been permitted to spend $250 billion to buy banks' risky assets, giving them a much-needed necessary cash infusion. There also would be another $100 billion for use at president's discretion and a final $350 billion if Congress signs off on it. Wall Street found further reason for worry overseas. Three European governments agreed to inject Fortis NV with a $16.4 billion bailout. Fortis, with has headquarters in Brussels, Belgium and Utrecht, Netherlands, is Belgium's largest retail bank. The British government, meanwhile, said it is nationalizing mortgage lender Bradford & Bingley, which has a $91 billion mortgage and loan portfolio. It was the latest sign that the credit crisis has spread beyond the U.S. Japan's Nikkei stock average fell 1.26 percent. Britain's FTSE 100 fell 5.30 percent, Germany's DAX index fell 4.23 percent, and France's CAC-40 fell 5.04 percent. Citigroup's acquisition will include five depository institutions and the assumption of debt. The FDIC said Citigroup will absorb up to $42 billion of losses on a $312 billion pool of loans. The FDIC said it would cover any additional losses. The FDIC gets $12 billion in preferred stock and warrants under the deal. Citi fell 44 cents, or 2.2 percent, to $19.71. Meanwhile, consumer spending fell in August to its lowest level in six months. The Commerce Department said spending remained unchanged rather than increasing 0.2 percent as economists had expected. It was the worst showing since February. Personal incomes rose a better-than-expected 0.5 percent after falling 0.6 percent drop in July. But after-tax incomes fell by 0.9 percent. Incomes benefited in past months from the government's stimulus checks. The Russell 2000 index of smaller companies fell 34.77, or 4.9 percent, to 670.02. Wall Street is also worried about overall sluggishness in the world's economy. In the U.S., for example, unemployment now sits at a five-year high of 6.1 percent. That rate is expected to increase, perhaps putting further pressure on consumer spending, which accounts for more than two-thirds of the nation's economic activity.
fineleg Posted September 29, 2008 Posted September 29, 2008 I see RED everywhere on Wall St and Main St What a pummeling!
Ram Posted September 29, 2008 Posted September 29, 2008 Its a big moment, this.. The irony is, even though the democrats were in control of the Congress, 2/3 of the republicans voted against the bill, rejecting it.
Ram Posted September 29, 2008 Posted September 29, 2008 I dont understand this really, the cost of inaction is far far greater than the cost of approving a hastily put together rescue plan. Am sure there will be an amended form of the bill that will be tabled again, with some of concerns regarding oversight, cost recovery and CEO pay being addressed in that. P.S: If I am right, all this hoopla over this finance bill has probably delivered the first casualty - The Indo - US nuclear bill. This session of the Congress was essentially, the last chance to pass the bill, before there is a change in govt. If this window is missed, it can only be tabled again in Feb, under a possibly Democratic govt, which may ask for a total overhaul of the certain clauses, further delaying the passage of the bill. P.S 2: One way or the other, we're all screwed.
Lurker Posted September 29, 2008 Posted September 29, 2008 I dont understand this really, the cost of inaction is far far greater than the cost of approving a hastily put together rescue plan. I think it is fair to argue that most Americans do not like the idea of bailing out Wall Street giants. When a man loses his house there is no bail out, when a company loses its money then suddenly there are cries of bail outs galore? At my workplace people are panicking and yet not one of them supports the bailout(and this is Republican heartland). Plus there is no end to bailouts. There is already discussion of how USA will lend money to wrecked Car makers out of Detroit for a measly 5% interest over 25 years. Welcome to United States of France. P.S 2: One way or the other, we're all screwed. Had it not been for that I would have opened the bubbly and enjoyed this misery. The endless greed, dressed as "investment" has killed the market. However the problem is that there is a danger of losing money in the banks as also jobs. There are no winners in this madness. :((
Dhondy Posted September 29, 2008 Posted September 29, 2008 There are no winners in this madness. :(( There are. If you are an enterpreuner, if you run your own business in manufacturing, you are enjoying the lowest interest rates in a generation.
yoda Posted September 29, 2008 Posted September 29, 2008 Bailout isn't going to stop the bleeding. All the bailouts (freddie, fannie, AIG, ...) so far haven't. Why keep paying for a failing solution? Let the market correct itself without tax payer money.
Lurker Posted September 29, 2008 Posted September 29, 2008 Its a big moment, this.. The irony is, even though the democrats were in control of the Congress, 2/3 of the republicans voted against the bill, rejecting it. Ironical as it might be, it is also true that Democrats are one group of folks who can easily be swayed into beleiving anything!! At best one can make the argument that Democrats realized the stakes against United States and in a moment of frenzy became all too patriotic and started supporting Bush. At worst the argument can be made that the Democrats are all hot air and talks and when it came to put their money where their mouth is they decided to support Bush, just the way they supported Bush in Afganistan, Iraq, surge yada yada. xxx
fineleg Posted September 29, 2008 Posted September 29, 2008 Had it not been for that I would have opened the bubbly and enjoyed this misery. The endless greed, dressed as "investment" has killed the market. However the problem is that there is a danger of losing money in the banks as also jobs. There are no winners in this madness. :(( Lurks, How is your investments, 401 etc doing? I am worried that it is going to take extremely long for markets to recover. No bubbly, no enjoying.
Ram Posted September 30, 2008 Posted September 30, 2008 In a very interesting twist to the tale, many republican Congressmen have blamed the Democratic speaker of the House, Nancy Pelosi, of playing partisan politics and alienating the republicans in the vote. In her speech, which was supposed to have been an endorsal of the rescue plan, Pelosi started taking potshots at the republicans for their brand of unregulated capitalism, which she said led to this crisis. Many undecided Republicans were apparently incensed at this blatant attempt to play the blame game at an important stage and decided to vote against the motion. Speaking after the vote, even many republicans seem a bit shocked themselves and acknowledged the need to have something done immediately, which leads me to think that VERY soon, there will be an amended form of the bill. P.S:Apparently, the Indo-US nuclear deal was passed in the Congress last Saturday and now needs Senate approval, before being signed into a law by President Bush.
Ram Posted September 30, 2008 Posted September 30, 2008 I think it is fair to argue that most Americans do not like the idea of bailing out Wall Street giants. When a man loses his house there is no bail out, when a company loses its money then suddenly there are cries of bail outs galore? At my workplace people are panicking and yet not one of them supports the bailout(and this is Republican heartland). Plus there is no end to bailouts. There is already discussion of how USA will lend money to wrecked Car makers out of Detroit for a measly 5% interest over 25 years. Welcome to United States of France. The question isnt about why should ordinary, hardworking and honest US tax payers bail out Wall Street fatcats, but rescue of the entire system really. Of course, the rescue should come with lots of conditions, but not doing anything and asking the markets 'to take care by yourself' could lead to potentially disastrous consequences. Already, the instability has began to spread to Europe, which till now, remained largely silent, compared to its friend across the Atlantic. Secondly, the US economy is already in doldrums. Unemployment is at 6.1%, a five year high. Inflation is skyrocketing and the gas price is still hovering at around $100/barrel. To top it all, there is the Housing crisis. We BADLY need some credit to flow through the economy. If the situation is allowed to continue as it is, for another 3-4 quarters, that could spell the death knell to the Auto and Real-estate Industry. And these behemoths employ 100s of thousands of American workers. If they too are rendered jobless, the crisis will only worsen from then. Recession is almost guaranteed.
Lurker Posted September 30, 2008 Posted September 30, 2008 Lurks, How is your investments, 401 etc doing? I am worried that it is going to take extremely long for markets to recover. No bubbly, no enjoying. I had made some early withdrawls this year so I was able to minimise my investments losses still have taken a few hits although I as I have mentioned before I dont exactly mind it. So long as the job market doesnt tank, and the banks holds the money I am cool.
Lurker Posted September 30, 2008 Posted September 30, 2008 The question isnt about why should ordinary' date= hardworking and honest US tax payers bail out Wall Street fatcats, but rescue of the entire system really. Of course, the rescue should come with lots of conditions, but not doing anything and asking the markets 'to take care by yourself' could lead to potentially disastrous consequences. Rescue of the system by whom? Who do you think would be receiving 700 billion dollars Sriram? Would it be Sriram working at a client site? Or would be some wise-***** CEO at AIG? That is the issue most opponents of the bailout are having. Why put the hands in the very crooks who are responsible for the fiasco? Would you go to your broker who lost your savings earlier only because if you dont do so your local broker market would fail?? Course not. There is a wide resentment amongst people for this Administration. From Iraq, WMD, economy, gas price there is simply not enough support. This President has the worst acceptance rating in history(less than 35% for over 3 years now). So who is gonna beleive him? As for Paulson and Bernanke, one of them is a scholar of Great Depression, and still we are in this situation go figure! The real danger here is if Banks dont have enough Cash flow. Thus companies would not be able to pay salaries etc. Although I must say even this business model needs to be revisited. xxx
vadodaravictor Posted September 30, 2008 Posted September 30, 2008 I am a buy-and-hold type of investor & I have sufficient emergency funds in savings accounts. I think, if we have money in stocks for the long haul, we should be fine. I am not going to panic and sell. Here is an excellent post from well known author http://www.bogleheads.org/forum/viewtopic.php?t=24361&mrr=1222737503
fineleg Posted September 30, 2008 Posted September 30, 2008 I am a buy-and-hold type of investor & I have sufficient emergency funds in savings accounts. I think, if we have money in stocks for the long haul, we should be fine. I am not going to panic and sell. Here is an excellent post from well known author http://www.bogleheads.org/forum/viewtopic.php?t=24361&mrr=1222737503 i hope so. usually in diversified mutual funds. but even those have been belted.
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