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Forums - General - Stocks Surge on Bank Plan for Toxic Assets

akuma587 on 23 March 2009

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.

0:00 /02:39Life in the pits

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

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akuma587 on 23 March 2009

Holy shit! Stocks rallied by 500 points! That's like 7% of the entire DOW! Geithner is back at his A game.



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

TheRealMafoo on 23 March 2009

Let's talk in a month.



akuma587 on 23 March 2009

So you won't wait to criticize Obama when he has been in office two months but you will wait to praise him when something his administration does has a visibly positive impact? That's definitely not a double standard.

I do think we hit the "bottom" recently, at least in terms of the DOW. You will still see employment numbers drop some, and will likely see negative GDP growth for awhile (although nothing as abysmal as the Q4 numbers, those were just plain awful).



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

TheRealMafoo on 23 March 2009
akuma587 said:
So you won't wait to criticize Obama when he has been in office two months but you will wait to praise him when something his administration does has a visibly positive impact? That's definitely not a double standard.

Sorry, not interested in praising the act of printing and giving up to a trillion away to buy assets that will default. It's great that the act of pissing away money makes people want to buy stocks. The long run damage however is far more then a 7% temporary increase.

The positive is no money has yet been spent (as no private investor sees this as a good thing), so the bump was free.

The down side is if the DOW was a refection of reality, then it will drop again, as no banks have really been helped.



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The_vagabond7 on 23 March 2009
TheRealMafoo said:
akuma587 said:
So you won't wait to criticize Obama when he has been in office two months but you will wait to praise him when something his administration does has a visibly positive impact? That's definitely not a double standard.

Sorry, not interested in praising the act of printing and giving up to a trillion away to buy assets that will default. It's great that the act of pissing away money makes people want to buy stocks. The long run damage however is far more then a 7% temporary increase.

The positive is no money has yet been spent (as no private investor sees this as a good thing), so the bump was free.

The down side is if the DOW was a refection of reality, then it will drop again, as no banks have really been helped.


So, even if everything worked the way it was supposed to and saved the world from a far worse long term economic crisis, I have the feeling you'd still be angry.

You can find me on facebook as Markus Van Rijn, if you friend me just mention you're from VGchartz and who you are here.

Kasz216 on 23 March 2009

I'm confused with what the government then does with the Toxic assets.

Just let them default and not collect on it?

Or do they let them default and start repossessing peoples shit.

I'm going to guess the first since that's less likely to alienate voters.

I mean it looks like they say they're trying to sell them to other people... but who wants toxic assets?



TheRealMafoo on 23 March 2009
Kasz216 said:
I'm confused with what the government then does with the Toxic assets.

Just let them default and not collect on it?

Or do they let them default and start repossessing peoples shit.

I'm going to guess the first since that's less likely to alienate voters.

I mean it looks like they say they're trying to sell them to other people... but who wants toxic assets?

 

I think the plan is to somehow partner with private investors. Have these investors run them, and front some money as well so they have a vested interest in a favorable outcome.

So Government is not doing it alone. If no private investor comes forward, they don't buy any assets.

The flaw in this is the most advantages thing for the bank to do is get rid of the worst of there loans (why they are doing this in the first place). What private investor is going to want to front money for theses? I guess if the split was so high (like the government paid 95%), some will, but that just means it's a loss to the government.



TheRealMafoo on 24 March 2009
The_vagabond7 said:
TheRealMafoo said:
akuma587 said:
So you won't wait to criticize Obama when he has been in office two months but you will wait to praise him when something his administration does has a visibly positive impact? That's definitely not a double standard.

Sorry, not interested in praising the act of printing and giving up to a trillion away to buy assets that will default. It's great that the act of pissing away money makes people want to buy stocks. The long run damage however is far more then a 7% temporary increase.

The positive is no money has yet been spent (as no private investor sees this as a good thing), so the bump was free.

The down side is if the DOW was a refection of reality, then it will drop again, as no banks have really been helped.

So, even if everything worked the way it was supposed to and saved the world from a far worse long term economic crisis, I have the feeling you'd still be angry.

 

How is what's going on going to "saved the world from a far worse long term economic crisis"? The way you get into one, is by doing what we are doing.

If for some strange reason it worked, I would do two things.

Praise Obama for discovering a new way to fix a debt problem.

Employ that technique and write a shit load of hot checks.



akuma587 on 24 March 2009

Here is the press release from Geithner. If you want some of the finer details.

http://online.wsj.com/article/SB123776536222709061.html



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