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Even though the Senate passed a bailout bill last night (read the full text from CNN Money here), stocks are dropping. After paring losses yesterday as it appeared that the Senate would pass its own version, and Warren Buffett invested a great deal of money into GE, things are turning sour again.

Even though there is a great deal of optimism that the House will pass this version — which includes a few sops to Main Street –  trepidation remains. After all, earlier this week the House version of the bill was supposed to have been a done deal. So it is far from certain that the House will be on board with this deal, especially if the voters decide that the scraps tossed in their general direction are not as nice as the steaks being tossed to Wall Street firms.

$700 billion bailout not enough to stimulate growth

Whether or not the bailout bill is passed by the House, though, there are concerns that $700 billion just isn’t enough to spur growth. Businesses, banks and consumers alike are having a hard time borrowing money, reports Bloomberg, and $700 billion may not be enough liquidity:

“There’s a liquidity crisis going on that’s putting investors on edge,” said Alan Gayle, the Richmond, Virginia- based senior investment strategist at Ridgeworth Investments, which oversees about $70 billion. “Liquidity is like oxygen. Lack of it can cause serious damage in a very short time.”

So if the Senate bailout bill isn’t going to do it for the economy, what’s the point? Is it time to try something else? Maybe something that requires companies to pay back emergency loans made by the government? Maybe something that encourages investment? Increasing the contribution limits on IRAs and 401(k)s may actually help. Consider: You could buy more stock at these lower rates, helping the companies raise capital, and when the stock market recovers, you could really reap the benefits. (Of course, that requires that you have a long time horizon.)

In the end, something probably needs to be done. But the Senate bailout bill probably isn’t it.

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, Senate bailout bill,
economy, investments, $700 billion bailout

Right now, things are getting a little dicey on Wall Street. After yesterday’s rather dramatic tumble in trading (was it an ultimatum to Congress?), things are looking toward a partial recovery today. The stock market is slowly turning around, doing its best to struggle to a rally. But the real question on everyone’s mind is this:

Which companies will survive the financial crisis?

It seems as though no company is immune from the effects. But some companies seem to be getting government help (AIG) and others are left to fail (Lehman Brothers). Others are recipients of guarantees and help to buy other companies out (JP Morgan). Indeed, as Stephen Simpson points out on Investopedia, it appears that the government is deciding who will survive and who will fail:

It seems apparent to me that the federal government has made an increasingly implicit (but not yet fully explicit) determination that a small group of larger banks will be allowed to play the role of buyer-of-last-resort. I doubt that the acquisitions of Merrill Lynch or Washington Mutual would have been permitted just a year or two ago, but now a lot of the anti-trust and regulatory oversight has been suspended in the name of keeping the whole system running. 

Of course, in this climate, it is hard to decide  which companies to invest in, with the hope that they will emerge intact and eventually thrive. It does appear, though, that Citigroup is likely to be in this group, as is JP Morgan and some of the other investment banks and others that are being helped along.

All this deal-making, though, is bad for the ordinary investor. The companies that are bought — like Wachovia — are finding that the value of their stocks is dramatically reduced, leaving investors (including those who have holdings in investment accounts) with practically nothing.

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.

It’s going to be a busy day on Wall Street today. Indeed, the stock market is already dropping on all the news coming in, even though some of it appears positive at first blush. Today’s big stock market news events include the $700 billion bailout, the auto industry bailout and Wachovia’s pending acquisition by Citigroup.

$700 billion bailout heads to a vote

The House is expected to vote on the $700 billion bailout package today. By Wednesday, a Senate version is expected. However, despite the fact that the bill is expected to pass, Wall Street is showing signs of trepidation. Rather than the three-page proposal by Treasury Secretary Henry Paulson (granting him sweeping powers and ensuring almost no oversight), the document is instead 110 pages and includes rules that limit executive compensation for companies that take advantage of the bailout, as well as limiting the power of the executive branch in the process.

Auto industry bailout

As part of a massive spending bill ($630 billion) last week, Congress passed money for an auto industry bailout via loans. The justification is that the Big 3 automakers need help getting their assembly lines and what have you modernized so that they can make more fuel efficient cards and hybrids. Which is funny. Since the auto industry has been throwing money at members of Congress for the past three decades in order to prevent that very thing from happening. I guess the nice tax breaks they have don’t allow them to enough capital to fund changes that would update their business models.

Wachovia to be bought by Citigroup

In an attempt to keep Wachovia from going under, the FDIC is brokering a beal whereby Citigroup is buying Wachovia’s banking operations. The move is designed to provide capital for the struggling financial company, prevent Wachovia from going out of business, and save the taxpayers money, since the FDIC won’t have to expend any funds.

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, auto industry bailout,
economy, investments, $700 billion bailout