Stocks plunge as government unveils bailout plan
NEW YORK – Investors are frustrated with the government's latest bank bailout plan — and showed it by unloading stocks. The major stock indexes fell more than 4 percent Tuesday, including the Dow Jones industrial average, which tumbled 382 points. Financial stocks led the market lower, a sign of how concerned Wall Street is about the government's ability to restore the health of the banking industry. Demand for safe havens like Treasurys and gold rose.
Traders and investors complained about what they saw as a lack of specifics from Treasury Secretary Timothy Geithner on how the government will direct more than $1 trillion in public and private support to the financial system.
The plan is aimed at restoring proper functioning to credit markets, which seized up over worries about bad debt after the September bankruptcy of Lehman Brothers Holdings Inc. The latest plan calls for a government-private sector partnership to help remove banks' soured assets from their books. It would also boost an effort to unclog the credit markets that govern loans to consumers and businesses.
"The good news is they are going to spend a trillion dollars, the bad news is they don't know how," said James Cox, managing partner at Harris Financial Group.
"They built this up as being a panacea," he said. "There was so much hope pinned on them to do a good job. The expectations have been so high. It's hard to live up to."
But Peter Jankovskis, co-chief investment officer at OakBrook Investments, said the government was right to outline a broad plan rather than putting something together hastily that might otherwise fail.
"They are doing the right thing by taking their time and not rushing through with bad policy," Jankovskis said.
Some investors questioned whether the plan, which followed previous efforts in the final months of 2008, would work. Some selling was to be expected, however, as stocks rose sharply last week ahead of the announcement.
Geithner's speech "basically puts a spotlight on the fact that the government has no idea how to fix the problem," said Jeff Buetow, senior portfolio manager at Portfolio Management Consultants. "People bought on rumor and hope, and now they're selling on reality."
NEW YORK – Investors are frustrated with the government's latest bank bailout plan — and showed it by unloading stocks. The major stock indexes fell more than 4 percent Tuesday, including the Dow Jones industrial average, which tumbled 382 points. Financial stocks led the market lower, a sign of how concerned Wall Street is about the government's ability to restore the health of the banking industry. Demand for safe havens like Treasurys and gold rose.
Traders and investors complained about what they saw as a lack of specifics from Treasury Secretary Timothy Geithner on how the government will direct more than $1 trillion in public and private support to the financial system.
The plan is aimed at restoring proper functioning to credit markets, which seized up over worries about bad debt after the September bankruptcy of Lehman Brothers Holdings Inc. The latest plan calls for a government-private sector partnership to help remove banks' soured assets from their books. It would also boost an effort to unclog the credit markets that govern loans to consumers and businesses.
"The good news is they are going to spend a trillion dollars, the bad news is they don't know how," said James Cox, managing partner at Harris Financial Group.
"They built this up as being a panacea," he said. "There was so much hope pinned on them to do a good job. The expectations have been so high. It's hard to live up to."
But Peter Jankovskis, co-chief investment officer at OakBrook Investments, said the government was right to outline a broad plan rather than putting something together hastily that might otherwise fail.
"They are doing the right thing by taking their time and not rushing through with bad policy," Jankovskis said.
Some investors questioned whether the plan, which followed previous efforts in the final months of 2008, would work. Some selling was to be expected, however, as stocks rose sharply last week ahead of the announcement.
Geithner's speech "basically puts a spotlight on the fact that the government has no idea how to fix the problem," said Jeff Buetow, senior portfolio manager at Portfolio Management Consultants. "People bought on rumor and hope, and now they're selling on reality."
