U.S. Stocks Ease After Big Open
Stocks are easing a bit after a big open today on Wall Street. (Easing caused by profit taking, maybe? All those Friday bargain hunters cashing in?) At any rate, after a rather big open, the stock market is easing a little and taking a more measured approach as investors process the 
announcement this morning of a new government plan to help recapitalize banks.
President Bush, Treasury Secretary Henry Paulson, Federal Reserve Chair Ben Bernanke and FDIC Chair Sheila Bair all spoke this morning about measures being taken to help promote liquidity in the financial markets and shore up the economy. (Also worth noting: Both John McCain and Barack Obama released economic policy proposals.) The plan is to help instill confidence in the banking system by making it very clear that the government stands behind U.S. banks and that the system will not be allowed to completely crash. To a certain extent, this confidence is also meant to help investors feel good about putting their money back into the stock market.
The current plan echoes plans being adopted in European countries. It involves government purchase of preferred (not voting) stock in banks. There is room for small banks, as well as large, to apply to the program. About half of the $250 billion is already spoken for in terms of who is getting aid from the government. There are conditions as well. Executive pay is limited for those companies that participate, and golden parachutes are not to be given to executives whose poor decision-making partially contributed to all the turmoil.
MarketWatch reports on what Paulson hopes will be accomplished by this bank rescue plan:
In addition, taxpayers will not only own shares that should be paid back with a reasonable return, but also will receive warrants for common shares in participating institutions. We expect all participating banks to continue and to strengthen their efforts to help struggling homeowners who can afford their homes avoid foreclosure.
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.
Tags: stock market, stock market news, investing blog, U.S. stocks,
economy, Henry Paulson, bank rescue
