Stocks Tumble as Bailout Plan Is Unveiled

CNBC
February 10, 2009

US stocks fell sharply Tuesday in a broad-based decline as the government announced details of its latest bailout plan.

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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.

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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.

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This article was posted: Tuesday, February 10, 2009 at 1:40 pm

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