today in black history

March 08, 2021

Henry L. Marsh, III is elected the first Black mayor of Richmond, Virginia, "the cradle of the Confederacy," on this date in 1977.

Market Drops against Bailout Squabble

POSTED: September 23, 2008, 12:00 am

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As lawmakers from both parties debated the merits of President Bush’s proposed $700 billion bailout of financial firms, the market was losing patience, dropping 372 points at the close of business Monday, and oil prices spiked $25 per barrel. It was not the type of reaction the White House was hoping for as Democrats and Republicans alike appeared skeptical of the President’s proposal.

Monday’s activity was punctuated by the news that the last two remaining investment banks, Goldman Sachs and Morgan Stanley, would reorganize their businesses into bank holding companies. The move comes after both companies had publicly expressed confidence in their financial positions despite watching other firms go under. The move by Goldman and Morgan Stanley spells an end to an era on Wall Street and the beginning of another, as the two companies will now compete more directly with existing commercial banks like Citigroup, JP MorganChase and Bank of America.

Mr. Bush’s plan almost immediately came under attack by the two men who hope to succeed him come January. Democratic candidate Sen. Barack Obama suggested that there should be no wholesale bailout of firms unless an effort is made to provide homeowners some relief. The Illinois senator also suggested that a second economic stimulus package should be a part of the bailout plan. Senator Obama also called for greater oversight and said Democrats and Republicans should reach agreement swiftly. For his part, Republican Senator John McCain also expressed concern over the extent of the bailout, suggesting that there should be provisions to hold companies accountable while also pointing the finger at government regulators, suggesting that any plan required a new oversight mechanism. He also suggested that the current White House proposal gave the Secretary of the Treasurer too much power.

No matter the partisan spin, the market wasn’t buying in. Apparently nervous investors, concerned that the federal government has yet to grasp the magnitude of the crisis, took their frustrations out on the trading floor. As criticism was being heaped on the administration’s proposal, others came out the box and offered their own take on the plan as well as the crisis in general. Rep. Barney Frank (D-MA), Chairman of the Financial Services Committee, early in the day suggested Democrats and the White House were close to an agreement, only to later retract that statement.

Senator Christopher Dodd (D-CT), Chairman of the Senate Committee on Banking, Housing and Urban Affairs, rolled out his own counter proposal to the Bush bailout plan. In Senator Dodd’s proposal there are provisions to limit executive compensation, provide assistance to homeowners and an insurance or guarantee program for money market mutual funds. Dodd will convene a hearing today on the administration’s plan, Secretary of the Treasurer Henry Paulson, Chairman of the Reserve Board Ben Benarnke and Securities and Exchange Commissioner Christopher Cox will testify.

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