Sat 4 Oct 2008
Poll du Jour: Will Bailout Plan Work?
Posted by Prieur du Plessis under Investment, Markets, Money
The deed is done. The US Congress yesterday passed the government’s $700 billion bank rescue plan, and the legislation was immediately signed by President George W. Bush.
The package gives the Treasury secretary extraordinary power to buy toxic assets from financial institutions and increase federal bank insurance, and requires the government to modify some mortgage loans.
In classic “buy on the rumor, sell on the news” fashion, the Dow Jones Industrial Index rallied by 3.0% leading up to the vote, but then sold off by a massive 486 points (4.5%) to end 1.5% down on the day and 7.3% on the week.
Do you think the bailout plan will work? Will it be sufficient to break the logjam in the credit markets? I have decided to run a quick poll to gauge readers’ opinion. All you need to do is to indicate your choice on the poll image below, followed by “Cast Your Vote”. The poll will run until 17:00 EST on Tuesday, October 7, 2008, whereafter I will post the results on the site.
Online Surveys & Market Research
Related articles:
Global liquidity crisis: What now?
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October 4th, 2008 at 4:44 pm
Capital is the “life blood” of banks. This bailout doesn’t give banks 1 dime of capital. Good thing the bill included bringing in Rum because we will need it.
October 4th, 2008 at 7:45 pm
Yes it will help. It will not recapitalize the banks that will probably need another $500B of new capital, but it will create an environment where private capital can be invested in institutions with known risk since the toxic waste will be removed from their balance sheets.
That said, it will take a long time for this to work out and the bill just passed will help but not insure success. It is not a bailout so let us stop talking about that. It is a buyout of toxic investments that have some value but that value is not known since the panic of “not knowing” has frozen the world financial system.
October 4th, 2008 at 9:50 pm
good idea.
but how do you define “work”?
- 10% stock market rally
- ted spread under 100
even still it will be hard to answer, i think this is just the beginning of “plans”, “fixes”, “remedies”. much more to come.
October 4th, 2008 at 10:18 pm
…. no.
October 4th, 2008 at 11:30 pm
justin,
PdP defined “work” as “will it break the logjam in the credit markets?” You have to read ALL the words.
October 5th, 2008 at 12:34 am
The American Heritage dictionary has several definitions but two seem especially appropriate:1) “to prove successful or effective” and 2)”to proceed laboriously” #2 seems closer in this case. The more nuanced answer is “eventually”.
October 5th, 2008 at 1:34 am
Work? It may work to accomplish the goal of Pres. Bush and Sec’y Paulson, which is just to delay the day of reckoning until the next administration is in office. If they wanted to do more than that they would have proceeded sooner (the credit markets have been frozen for months) and they would have allowed time for a legitimate debate regarding the best remedies.
October 5th, 2008 at 3:02 am
The Market in on the starting blocks of a Marathon likely stretching out until fall of 2009. By midweek we will have bottomed and started up in the 3rd of the 3rd wave, the longest and strongest. See the latest Market Letter in our archives, including our verified performance in excess of 120% in the last 12 months…
http://www.exceptional-bear-market-letter.com/2.html
Regards,
Eduardo Mirahyes
October 8th, 2008 at 5:45 am
My people say it will cost 3 trillion not 700 billion. Not until accountable heads roll in the both houses and over site placed ( not more rule and regs.) will we start to trust start to build. Until then all upsides are bull traps. LOL
PS can any one find a way to get back the 6 trillion we lost on “The great Society”?