Wall Street Markets Crisis: Send us a financial rescue that works
Wall Street Markets Crisis: Give us a financial help that works. If Wall Street wanted to keep the pressure on world leaders for another huge government-led bailout of the global financial system, maybe the rally in the final hour today wasn’t the right strategy.
Nonetheless, hope for a rescue that will finally turn the tide helped pull stocks up sharply from their lows. Some market sectors even scored significant gains for the day — although they barely made a dent in the week’s losses.
The Dow Jones industrials finished off 128 points, or 1.5%, at 8,451.19, after being down as much as 695 points, or 8.1%, at the start of trading.
So we were on our way to Black Friday — for about six minutes. That was followed by a rally that briefly lifted the Dow into positive territory (up about 90 points), then another sell-off, then a major rally in the final hour, then another pullback.
Just another day of insane volatility, except this one was even more insane than usual: The Dow’s intraday swing spanned 1,006 points from its low to its high — the first time that has ever happened.
For the week, the Dow lost 18.2%, the biggest percentage drop in the index’s 112-year history. The New York Stock Exchange composite plunged 19.5%.
“It’s got to end somewhere,” said Michael Mainwald, head of trading at Lek Securities in New York.
But whether this was it — with the Dow, at its low for the day, off 44.3% from its record high one year ago this week — only the market knows for sure. And it isn’t giving many clues.
A rally in bank stocks set the tone for the day’s recovery, traders said: Everybody was expecting the Group of 7 industrialized nations this weekend to put forth some new package of fixes for global credit markets, which remain largely frozen.
Banks could be the major beneficiaries of any new moves. Treasury Secretary Henry M. Paulson said after trading ended today that the U.S. would move ahead with a plan to inject capital directly into banks and other financial institutions, taking non-voting shares in return. This would be part of the $700-billion bailout Congress approved last week.
In regular trading, JPMorgan Chase & Co. jumped $4.96 to $41.64; Citigroup rose $1.18 to $14.11.
Awaiting concrete action by policymakers, financial institutions and other investors continued to hoard cash early today. The annualized yield on three-month Treasury bills sank to 0.19% from 0.52% on Thursday as buyers swarmed.
Many analysts believe that G-7 finance chiefs have gotten the message, after the mammoth losses in stock markets worldwide this week. Yet the statement policymakers put out this afternoon was filled with generalities. Markets will want something more specific — or else.
“The G-7 has to come up with some really new and profound ideas for lubricating the world’s banking system and restoring the flow of credit to the private sector,” said Carl Weinberg, chief economist at High Frequency Economics in Valhalla, N.Y.
“Otherwise, the ensuing liquidity trap will lock up the world economy and throw us into a recession within a matter of days and weeks, not months and years.”
See economist Nouriel Roubini’s proposals for massive government intervention in this earlier post.
The following are just comments. Please leave your views afterwards:
Why isn’t ‘the rescue that works’ just butting out and letting the markets correct so we can invest intelligently going forward? The government by propping up assets with no value not only is ripping off taxpayers, it is perpetuating malinvestment which will make the final crash that much harder and longer. This is exactly what they did that prolonged the Great Depression.
Not to mention the absolute irony of ripping off the poor and middle class to fund the wealthy.
This is almost too much crap to even swallow. The feading frenzy continues and they are feeding on us.
People should wake up to the fact that a moderate amount of socialism is good not only for the people of the world, but for commerce as well. We cannot continue to rely on the principle of competition to drive forward progress. Instead, we must begin implimenting the principle of cooperation. If we do not, the whole world will “lose”. I work for an organization committed to the principle of Sharing. Click on my name to go to the website.
Remember that saying about boiling a frog by slowing turning up the temp on the pot? Well, if they gave out all the bailouts in one shot, there would be a complete uproar. But this way, they’ll just keep dishing it out for the foreseeable future. Wall Street has another way to make money now. Welcome to the fruition of moral hazard – private profits and socialized losses.
In the near future, there is going to be a time where we all are standing here at the bottom, looking up, looking at where we have been and be in relief it is all over. Sites like these will no longer be impacting economic news. The dust will settle and there will be great deals to be made, great opportunities to invest in and we will all move on. It will be a time for rebuilding, working together hand in hand, and lending a helping hand. Our actions will have become a part of history. You will be able to tell your grandkids you made it through the crash of 2008 and tell them your part. Your character will be determined, did you believe on not, did you hold on or not, did you panic or not, did you ride the course or not, did you contribute or take. What was your role, what did you do to help others, what did you do to help America in it’s time of need? Your decisions and actions today are what are building tomorrow. Make sure they are the right decisions.
Its simple. All Wall Street brokers have are IOU’s from everybody else who has nothing but IOU’s. Now all they have are pieces of paper that say they have money but it not worth the paper it is printed on. They took out all the real money, blew it or should I say embessled it on thier own personal life styles,bank accounts and corporate parties. So I say the party over go out and get a REAL JOB!!!
No, the market is telling us that investors don’t trust The Marxist Messiah. As Obama goes up in the polls, asset values go down worldwide.
But Armageddon can wait.
I know it’s the stretch run of a presidential election. I know the media has drank the kool-aid and is without question completely in the tank for the Marxist Messiah Barack Obama. I know that it makes sense for them to gin up as much pessimism in capitalism as possible but really. This panic is completely overblown and senseless.
Yes, the government went diversity mad and extorted banks to abandon their traditional lending criteria in favor of affirmative action lending which has left us with millions of mortgages that are not going to be repaid by their makers. Big deal. The underlying properties still have some value. Maybe it’s only 70 percent. Maybe it’s only half but there is a tangible value there. Someone will be more than willing to move into those houses and make the payments provided the valuations aren’t too far off from reality.
Yes, banks and mortgage-backed securities investors are going to have to absorb some losses. But, other than that, our economy still has the same building blocks as it did a year ago. No one has bombed New York City, Washington, D.C., our off shore oilrigs or anywhere else for that matter.
Everything still works. All of the technologies developed over the history of mankind still work. Yes, the infrastructure is a bit worn in places but we still have the greatest system of roads, bridges, canals, railways, airports, power plants, sewer systems, pipelines, electrical transmission lines and communications networks ever devised. Our work force hasn’t been hit by a plague nor have they forgotten how to do what they do. No one has tried to shut off our oil supply or quarantine our exports. All of our farms are still producing at record levels. Manufacturing capacity is still in tact even if demand is questionable.
As any fool knows but no politician has the guts to say these days, the fundamentals of our economy are sound.
The real reason why investors are bailing out of the market has nothing to do with the soundness of the economy. It has to do with the certainty of property rights.
As polls now indicate that we seem to be on the verge of electing a Marxist to the office of President of the United States, investors worldwide interpret that as a lack of faith in free enterprise on the part of the American people. Now, of course, workers all over the world know that Marxism is a miserable failure and they wonder what will happen to the world economy if that bulwark of freedom, The United States of America, suddenly loses its collective mind and abandons the very principles that made it the greatest nation with the highest standard of living and largest economy in history.
That is why the markets are tanking. With the specter of a Marxist taking over as “Leader of the Free World”, no one knows for sure if anybody really owns anything. If the U.S. no longer believes in freedom, who will guarantee, or even threaten to guarantee, the property rights of the Free World?
Walter Williams sums up their sentiment like this, “We might have reached a point where the trend is irreversible and that is a true tragedy for if liberty is lost in America, it will be lost for all times and all places.”
It’s not a crisis of economic confidence. It’s a crisis of political confidence.
And the Marxist Messiah is at the heart of it.
Wall Street must also battle the public, and politicians who are more than happy to get involved, for a vote. Has Government intervention EVER made anything better? income redistribution has never solved a problem, and likely never will. leave wall street alone and it will heal, and let the capitalists do what they do best- by finding a way to realize a return on their investment.
the oil acquisition project seems to be stalled, and absent another “catastrophic and catalyzing event… like a new pearl harbor”, it seems unlikely to get back on schedule.
crashing the stock market seems counterproductive, unless you’re in position to loot like the oligarchs looted the soviet union as it collapsed, but maybe that’s all that’s left… looting… but there’s no doubt that america will suffer a massive readjustment of its way of life even though “the american way of life is not negotiable”.
yawn.
it just gets tiresome as the powers-that-be resort to all these shenanigans in an effort to disguise the fact that their “new pearl harbor”, a pretext to start the oil acquisition project, was their response to peak oil.
it would have been so much simpler had they told everyone the truth right from the beginning, starting in maybe 1970, when american oil production peaked, despite the best tech, the best experts, and the biggest bankrolls…
…but now it’s too late to tell the truth, isnt it…? …because if the powers-that-be acknowledged the cause of these problems, they’d make it easier for common people to connect the dots… peak oil to 9/11 to the “war on terror”.
“Why isn’t ‘the rescue that works’ just butting out and letting the markets correct so we can invest intelligently going forward? ”
Because what they are not telling you is that the “correction” means 30-40% unemployment, ghost towns, severely limited civil infrastructure, all within a few years, months maybe.
Think about what happens when cities cannot pay their police forces. People volunteer for the job. There’s a word for that: Vigilantes.
Are you *sure* you want the government to “just but out” and let the markets “correct” even if the “correction” means the complete failure of the financial system?
Personally, I thrive on chaos, and I think it will be interesting to see unemployment and homelessness become so common as to lose their stigma. And I lost all my money in the market the *last* time it crashed. I had no choice in the matter — hundreds of thousands of dollars of un-matured stock options became worthless in 1999-2000. I am still struggling with that, and laughing at all the people who are losing today. Yes, laughing at them. And reading Hemingway and Steinbeck the whole time too.
So I agree with you, the government should butt out and let it fail… but for a different reason: My reason is that I find the chaos and irony to be delicious, and I welcome the fall of cities and the elimination of the capitalist system, the destruction of the hypocrites, and any pain that is inflicted on the super-wealthy and their pathetic aristocratic families. Any questions?
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After wading through way too many words used to arrive at an irrational conclusion which is totally useless to addressing your subject, I am compelled to say you desperately need a sanity check. Were it not for the capitalism you negate, there would be no computer or internet for you to publish this trash.
Neither Wall Street nor government can possibly correct the imbalance which triggered this collapse (yes, collapse) by treating the effects unless the Cause is corrected. The causes being manipulation of the dollar by the Fed, together with consent of Congress and it’s CRA, these are impossible to correct years later, and the USA will soon enough admit to bankruptcy as the result of unfunded socialism and government’s incredible addition if all it’s muddled-minded “solutions” to the national debt.
Global crisis is not only about companies of financial services. It is about common people as well. The ones with loans, credits, mortgages. The ones with jobs to preserve, houses to retain, families to maintain, relatives to support, children to send to colleges. The ones with budgets, where every cent has its destination. How many of the people lose jobs, cars, homes? How many have to cut out the spendings, which they considered a normal part of their lives?