Obama bank plan skids on Wall Street

Dow drops 382 points

The Obama administration unveiled its long-awaited bank rescue plan Tuesday but did not spell out how it would resolve the most critical issue on Wall Street - how to dispose of unsellable debts - provoking widespread disappointment that sent the Dow Jones Industrial Average plummeting nearly 400 points.

The goal of the program is to dramatically widen aid for banks and credit markets, using $300 billion from the Treasury's remaining bank bailout funds to try to leverage as much as $2 trillion in funding from private markets and the Federal Reserve as the way to return the financial system to health.

But the most critical element of the plan - to create a fund that would purchase and dispose of trillions of dollars of souring loans on bank books using a combination of federal and private funds - was offered in only two vague paragraphs that gave little hint as to how the program would work and provoked massive skepticism on Wall Street.

Major stock indexes lost nearly 5 percent of their value, the Dow fell back below 8,000 to end at 7,888.88, and bank stocks that were supposed to be helped by the plan plummeted by 14 percent on average in the worst market drubbing since the day President Obama took office.

Presenting the Obama administration’s plan for overhauling the financial rescue, Treasury Secretary Timothy F. Geithner called for more direct capital injections, a new program to buy troubled assets and a focus on consumer credit. The reaction to Mr. Geithner's speech was was lukewarm, at best. And U.S. markets took a dive, within minutes of the beginning of Mr. Geithner's speech. As for 'vulture investors', on whom the government is relying to buy the risky assets that banks cannot seem to get rid of, they seem reluctant to purchase them.

Goldman Sachs and Morgan Stanley have indicated their companies were hoping to return bailout funds as quickly as possible, on worries the government may intrude further in their business.

In Europe meanwhile, European finance ministers discussed details of how to address their banks’ problems, including a call for weekly reporting by banks affected on the value of their portfolios. Most analysts are revising their forecasts for gross domestic output in Europe downward for the fourth quarter. In the U.S., another indicator pointed to more bad times, with continuing inventory reductions, at their lowest in nearly 17 years.

CRISIS TO RESET ECONOMY

Businesses that plan to get through the recession by just hunkering down and waiting for the storm clouds to clear are underestimating the economic challenges that lie ahead.

Jeff Immelt, chair and chief executive officer of GE, told executives at a Canadian Club event in Toronto yesterday that the economy has been changed forever by the events of the past 18 months.

"If you think this is only a cycle you're just wrong. This is a permanent reset," he said. "There are going to be elements of the economy that will never be the same, ever."

Immelt said financial systems aren't going to bounce back to the way they were. The increased role of government – as a partner, regulator and financier – will last for decades. Credit will always be tighter than it once was.

"Smart businesses are the ones that are going to hunker down in the cycle, which you've got to do, but that also understand we're going to come out of this in a different world.


GM's future in Ontario may be revealed Feb. 20

Industry Minister Tony Clement says Chrysler and GM will present recovery plans to Ottawa on Feb. 20 that will determine the level of federal-provincial bailout funding.

"(They) will be presenting plans for the future in Ontario and Canada."

The move will come three days after GM and Chrysler make a similar pitch to the U.S. Congress.

Last month, GM declined a $3 billion emergency short-term bailout from the federal and provincial governments, which some saw as a signal the car maker has no intention of staying in Canada.

"I have heard that kind of commentary. All I can tell you based on my observations they (GM) seem to be having discussions with us in good faith and that does not appear to be their modus operandi," Clement said.

GM Canada spokesperson Stew Low said: "While we cannot say much at this juncture as discussions are continuing, I can tell you that GM is working with all stakeholders (government included) to ensure we are a viable and sustainable company going forward."



CAW president Ken Lewenza said there is every reason to be concerned.


"In December this was a crisis and in January if the money didn't come the Canadian operations were in jeopardy and then suddenly the signal from General Motors was that `we really don't need it.'"


Keep well,

Cheers!

Yea, I read the exact same words at following links combined ..
http://topics.nytimes.com/topics/reference/timestopics/subjects/c/credit_crisis/
http://www.washingtontimes.com/news/2009/feb/11/obama-bank-plan-skids-on-wall-street/?page=2