Stock Market Falters as Bailout Plan is Weighed
Earlier today, the U.S. stock market rose as hope among the Wall Street crowd revolved around the idea that a $700 bailout package would be passed. However, there are still questions about the package, as well as scrutiny by the Democrats in Congress (and outright protest against a bailout by some Republicans) about the terms. Concerns surround the fact that the proposal seems to give Secretary of the Treasury, Henry Paulson, sweeping financial and executive powers.
Other concerns include such items as:
- Allowing CEOs who made poor decisions to retain their large compensation.
- No help for homeowners who are struggling in this mess.
- The lack of regulatory oversight proposed by the Treasury Department.
The Street reports on how much Wall Street would like to see this deal, as well as some of the downsides of such legislation:
“If the deal gets passed, the stock market is going to react well because they believe that the plan can return liquidity to the markets,” said Chip Hanlon, president of Delta Global Advisors. However, he said that the plan has inflationary implications, and commodities will also increase in price as a result of the plan.
There are worries that these issues will stall passage of the legislation needed to flood the market with dollars and increase liquidity. In fact, this is a very real concern for some as political wrangling begins on Capitol Hill.
Even calls by Henry Paulson and Fed Chair Ben Bernanke for Congress to pass the legislation quickly haven’t completed quieted the stock market, and stocks are down overall today as trading heads closer to a close.
Indeed, this is probably a time for caution, rather than a time to try and ram through hasty legislation. Remember what happened the last two times Congress rushed into things and granted sweeping powers to the executive branch? We got the USA PATRIOT Act and the Iraq War. Perhaps a bit of wrangling, reflection and delay is needed at this time. We aren’t likely to slip into complete financial ruin while cooler heads attempt to prevail.
Disclaimer: I am not an investment professional. Nothing in this piece or on this Web site should be construed as investment advice. Before making investment decisions, do your own research and/or consult with an investment professional. All investment comes with the risk of loss. You are responsible for your own investment decisions and any loss that may result from your decisions.
