February 10, 2009
US stocks fell sharply Tuesday in a broad-based decline as the government announced details of its latest bailout plan.
The Dow Jones Industrial Average was down nearly 300 points after Treasury Secretary Tim Geither revealed details of the bank-bailout plan. Earlier, the blue-chip index was down less than 100 points.
Some market pros said the market selloff was simply a case of buy on the rumor, sell on the news.
Tony Crescenzi of Miller Tabak said Geithner spoke to the wrong street: Main Street instead of Wall Street.
“The problem is that Geithner needed to speak more to Wall Street, where the problems lie, rather than stay at a distance as he did, and leave Wall Street with too few details with no roadmap by how it might find its way out of current difficulties,” Crescenzi wrote in a note to clients.
The “Financial Stability Plan,” as it’s now called, consists of four main components:
1) It will set up a public-private fund to mop up to $500 billion of spoiled bank assets.
2) It will set up a consumer-lending facility to support up to $1 trillion in new lending.
3) It will devote up to $50 billion to help stem home foreclosures.
4) It will provide new funding to banks after a “stress test” to determine if the bank is healthy.