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Dow jumps as Obama admin. moves on bad bank assets
(Agencies)
Updated: 2009-03-24 07:51 WASHINGTON -- The Obama administration aimed squarely at the crisis clogging the nation's credit system Monday with a plan to take over up to $1 trillion in sour mortgage securities with the help of private investors.
The coordinated effort by the Treasury Department, the Federal Reserve and the Federal Deposit Insurance Corp. relies on a mix of government and private money -- mostly from institutional investors such as hedge funds -- to help banks rid their balance sheets of real-estate related securities that are now extremely difficult to value. The goal, said Obama, is to get banks lending again, so "families can get basic consumer loans, auto loans, student loans, (and so) that small businesses are able to finance themselves, and we can start getting this economy moving again." It was a huge gambit and one that came like a tonic to Wall Street, which had panned an earlier outline of the program that lacked detail. Stocks soared, the Dow Jones industrial average shooting up nearly 500 points, thanks to the bank-assets plan and a report showing an unexpected jump in home sales.
It was the reverse of what happened Feb. 10. Then, after Obama had helped raise expectations toward Geithner and the plan, the treasury secretary went before cameras and bombed. The Dow plunged about 300 points amid investor confusion about details. The fleshed-out plan is designed to help fix a value on damaged mortgage loans and other toxic securities. If the value of the securities goes up, the private investors and taxpayers would share in the gains. If the values go down, the government and private investors would incur losses. |