Wednesday, October 1, 2008

Stocks Lower as Senate Prepares Vote; Soros Floats Alternative

The Dow recovered from a 200-point loss early on and finished moderately lower as prospects for a bailout or "rescue" (as John McCain prefers) bill improved overnight with key Senators vowing a vote on the measure Wednesday night.

A number of new elements have been tossed around the periphery of the plan that failed in the House on Monday, the best-received being a move to increase FDIC insurance to $250,000 on bank deposits, though that - and other suggestions - are merely cosmetic.

The bill still contains the fatal flaw of that gaudy $700 billion price tag, and senators in close races are sweating bullets over the largely unpopular measure. The compliant mainstream media has been instructed to push the "something must be done" mantra to the public, though many on Main Street are still resistant.

At the crux of the matter is all forms of credit being squeezed to the point at which the global financial system is nearly completely dried up. Libor rates (the percentage on money that banks lend to each other) have been extremely high, yesterday marking a record of 6.88% for overnight loans between banks. One-month loans are also high as banks have lost faith in other banks and are nearly refusing to lend. Around the globe, five banks have been rescued by governments and central banks this week alone.

While the Senate ponders its task ahead, conditions in Europe have reached crisis proportions as well. The EU has been promoting talks between mega-banking interests and, separately, leaders of the "Big Four" powers - Great Britain, France, Germany and Spain - in an ongoing effort to stave off more bank failures and a complete financial meltdown.

Adding to the mix is a proposal by billionaire investor George Soros, who made his case in a pair of editorials in the Financial Times, first on September 24, and most recently - and with clearer outlines for an alternative plan, on October 1.

The Senate vote is scheduled to begin around 9:00 pm. As of this writing, debate is underway.

Both presidential candidates returned to Washington for the vote. Here is the complete text of Barack Obama's speech on the Senate floor in support of passage. Senator McCain has also voiced support for the bailout package.

While the crisis drama intensified in Washington, Wall Street spent the day in a less volatile trading session.

Dow 10,831.07 -19.59; NASDAQ 2,069.40 -22.48; S&P 500 1,161.06 -5.30; NYSE Composite 7,519.95 -12.85

Declining issues held a slight edge over advancers, 3561-2769. New lows continued their domination over new highs, 406-24. Volume was moderate.

NYSE Volume 1,469,006,540
NASDAQ Volume 1,948,804,625

Commodities remained mixed. Oil was down again, losing $2.11, to $98.53. Gold rose $6.50, to $887.50. Silver rebounded as well, gaining 50 cents to $12.77.

Whatever occurs in Washington tonight and in the House of Representatives - who will revisit the issue on Friday - passage or rejection of the measure will have a dramatic impact on Wall Street. Whether this action, and that of our European counterparts, will manage to restore confidence to the ruined banking system is less clear.

A complete seizure of world economics would precipitate war, famine and generalized disaster to much of the world. America, being the world's most prosperous nation, will suffer the least by comparison. It is the poor and developing nations which will bear the brunt of the fallout from what can only be described as naked greed in financial circles.

It is because of that concept that many hold Wall Street financiers in contempt, wishing that they, among the richest men and women in the world, would share the same fate as those at the bottom of the economic system.

To that, one can only sympathize and hope for some shred of equality.

No comments: