http://money.cnn.com/2009/03/23/markets/markets_newyork/index.htm?postversion=2009032312
Stocks spike on bank plan
Wall Street welcomes Obama administration plan to buy up close to $1 trillion in bad bank assets.
NEW YORK (CNNMoney.com) -- Stocks continued their rally on Monday afternoon as investors hailed Treasury's plan to buy up billions in bad bank assets, seeing it as a critical move in stabilizing the financial system.
The Dow Jones industrial average (INDU) gained 315 points, or 4.3%, over 2-1/2 hours into the session. The S&P 500 (SPX) index rose 34 points, or 4.5%. The Nasdaq composite (COMP) added 61 points, or 4.2%.
"I think the stock reaction is a vote of confidence in the plan," said Jack Ablin, chief investment officer at Harris Private Bank.
He said investors are glad to have details about the plan because previous Obama administration announcements failed to give enough specifics.
He added that the stock market is also reacting well because the plan is skewed in favor of the private investor, who only has to be responsible for around 7% of the total in any transaction.
Stocks have gained for the past two weeks, despite tumbling last Thursday and Friday. But that retreat gave investors an opportunity to jump back in Monday, with bank shares leading the advance.
Citigroup (C, Fortune 500) jumped 18%, Bank of America (BAC, Fortune 500) jumped 15% and Wells Fargo (WFC, Fortune 500) gained 11%. The KBW Bank (BKX) index gained 10%.
Last week the Federal Reserve announced it was pumping another trillion into the economy to try to get credit flowing.
"Between the Fed announcement last week and the Treasury program this week, there are some tangible steps the government is taking and that is going to give the market the potential to keep moving higher," Ablin said.
Since tumbling to 12-year lows two weeks ago, the S&P 500 has now rallied 18% as of midday Monday. But even with the enthusiasm Monday, the S&P 500 bumped up against 800, a key resistance level that analysts say it will need to surpass if the market is going to be able to make a sustained move higher.
Bad-asset plan: On Monday, Treasury rolled out its long-awaited plan to purge bank balance sheets of as much as $1 trillion in sour assets that are limiting lending and prolonging the recession.
The government will commit $75 billion to $100 billion of taxpayer money to launch the "Public-Private Investment Program," which seeks to create a market for that bad debt.
The government plans to run auctions between the banks looking to unload the bad assets - such as subprime mortgages - and the investors looking to buy them. The Federal Reserve and the Federal Deposit Insurance Corp. will be involved.
Economists have said that stabilizing the banking system is key to stabilizing the economy.
We had two bags of grass, seventy-five pellets of mescaline, five sheets of high-powered blotter acid, a salt shaker half full of cocaine, a whole galaxy of multi-colored uppers, downers, screamers, laughers…Also a quart of tequila, a quart of rum, a case of beer, a pint of raw ether and two dozen amyls. The only thing that really worried me was the ether. There is nothing in the world more helpless and irresponsible and depraved than a man in the depths of an ether binge. –Raoul Duke
It is hard to shed anything but crocodile tears over White House speechwriter Patrick Buchanan's tragic analysis of the Nixon debacle. "It's like Sisyphus," he said. "We rolled the rock all the way up the mountain...and it rolled right back down on us...." Neither Sisyphus nor the commander of the Light Brigade nor Pat Buchanan had the time or any real inclination to question what they were doing...a martyr, to the bitter end, to a "flawed" cause and a narrow, atavistic concept of conservative politics that has done more damage to itself and the country in less than six years than its liberal enemies could have done in two or three decades. -Hunter S. Thompson
