CroMagnon wrote:It appears they are making up some rules as they go along.
This is from MSN Money.News of the plan was first reported by CNBC around 3 p.m., and stocks immediately shot higher. A At the close, the Dow Jones industrials were up 410 points, or 3.9%, to 11,020. The Standard & Poor's 500 Index was up 50 points, or 4.3%, to 1,206, and the Nasdaq Composite Index was up 100 points, or 4.8%, to 2,199.
The bank rescue concept, as reported by CNBC, would involve creating a federally-chartered company that would buy the bad assets of banks, investment banks and others. The financial institutions would then be able to raise new capital and lend money and finance new ventures.
I realize there is precedent for this in the Savings and Laon bailout, but it seems rather odd to be able to wave a magic wand and make the debt disappear. Wish I had one of those.
The rules are that the fed is not letting 1929 happen again. I have fielded more than 40 calls in past three days from clients worried if they should
1. Just withdraw their cash from the bank and keep it at home
2. Is their money safe (in cash) at major brokers like Schwab and Vanguard)
3. Should they buy T-bills (even though at one point yesterday they offerred a NEGATIVE yield)
4. Should they buy Swiss francs or euros because they are worried the US will lose its AAA rating
The market is someone yelling fire in a theatre right now. The Fed obviously knows more than we do and is using all stops to stop the insanity
Right now you can get 65% yield to maturity on 1/15/09 Morgan Stanley bonds
What does that tell you about what the bond market thinks about their survival chances?