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Investors Anxious for Details of Bank Bailouts and Economic Recovery Plan

23 February 2009 - Features - Editor

Following the unveiling of a bank bailout plan two weeks ago which left many questions unanswered, financial stocks as well as the broader US market have taken a beating. The ability of banks to remain afloat in a recession, which is likely to continue for some time, remains a primary concern among the majority of stock market traders. Speculation that the government may be obliged to nationalize embattled banks served to push investor anxiety levels up a notch, negatively impacting on stock market performance last week with the Dow closing on Friday at its lowest ebb since October 2002 and the S&P500 ending the week just 18 points shy of an eleven year low.

With contradictory views and speculation with regard to the rescue of the US banking system being the order of the day, it would appear that investors have good reason to be concerned. Senate Banking Committee Chairman Christopher Dodd has been reported as saying that banks may need to be nationalized for a short period of time, a view which contradicts the statement made by White House press secretary Robert Gibbs that the Obama administration supports a banking system that is privately held. Investors are no doubt looking forward to the report from Federal Reserve Chairman Ben Bernanke, as well as House hearings and a congressional address from President Obama in the upcoming week, all of which are likely to offer some clarification on the various rescue plans being put into place by the government.

President Obama has acknowledged that his success or failure as the President of the United States is likely to be defined by his ability to fix the US economy, and since being sworn into office on 20 January, he has made every effort to reassure Americans that dealing with the deteriorating economy is a top priority. One of the aspects of the $787 billion economic recovery plan that will benefit up to 95% of American taxpayers is the implementation of tax cuts effective April 1. This move fulfills a campaign promise made by Obama and it is hoped that the additional take-home pay generated by the tax cuts will stimulate consumer spending and assist the economy on the road to recovery.

 


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