Closing Market Update: Stocks Teetering on Bailout Uncertainty
- Sep 23, 2008
The market almost liked the prepared testimony from Fed Chairman Ben Bernanke (pictured), Treasury Secretary Henry Paulson, SEC Chairman Christopher Cox and OFHEO Director James Lockhart. After rising during morning trading, stocks dipped again in the early afternoon and the Dow Jones index ended the day down 161 points, largely due to lingering questions and concerns about the plan.Will Congress give U.S. Treasury Secretary Henry Paulson $700 billion or more to spend to bail out Wall Street, no strings attached — and with no Congressional or judicial oversight? Maybe, but with Jim Bunning (R-Ky.) calling it socialism and Christopher Dodd (D-Conn.) saying the economy and the U.S. Constitution are put at risk by the sweeping unfettered powers in the plan, probably not. Hence the market volatility. For more on the Congressional hearings, compromises by Treasury, and what lawmakers, economists and pundits have to say about the Mother of All Bailouts, see today’s article in CPN by Gail Kalinoski, Contributing Editor. In the for-what-it’s-worth department, Standard& Poor’s has released the June results for its S&P/GRA Commercial Real Estate Indices. Nationally, commercial real estate prices are up 1.5 percent in June 2008, compared with June 2007. The S&P/GRA Commercial Real Estate Indices comprise ten commercial real estate indices: a national composite, five geographic regions and four national property sectors. All well and good, but then again it isn’t June 2008 any more — the events of September 2008 mean that all bets are off for commercial real estate values in the near future. As expected, Nomura Holdings Inc., Japan’s largest securities firm, has agreed to buy Lehman Brothers Holdings Inc.’s European and Middle Eastern investment banking and equities operations today. “This transaction will significantly extend our European footprint,” said Nomura president Kenichi Watanabe in statement — but he did not say how much the company was going to pay for that bigger footprint. Nomura is going to pay $225 million for Lehman’s Asia-Pacific operations. Besides converting to a bank holding company, Morgan Stanley is trading a chunk of itself for cash — as much as 20 percent for $8.4 billion to Mitsubishi UFJ Financial Group Inc., Japan’s largest bank. What of the other “last man standing” on Wall Street — Goldman Sachs? Likely to muddle through, according to some observers. As a newly minted bank holding company, “we see the perception of Goldman Sachs as a perpetually independent company as improved,” wrote JP Morgan Chase & Co. analyst Kenneth Worthington in a research note. Warren Buffet certainly believes in Goldman Sachs. Late in the day Tuesday, the renowned investor bought a stake in Goldman to the tune of about $5 billion, or about 9 percent of the former investment bank’s stock. News of the surprise move didn’t really seem to calm fears among investors, for the moment anyway. The Dow Jones Industrial Average dropped 372.75 points, or 3.3 percent for the day, evaporating the 368-point rally Friday.According to Bloomberg News, Goldman, now the fourth-largest U.S. bank by market value, is more interested in buying deposits than in buying entire banks. It might buy deposits in the wholesale market and also those of failed institutions — anyone remember IndyMac? — that are controlled by the FDIC.