Nov. 24, 2008
Citigroup Bailout Fuels Wall Street Boon
Dow Jumps 400 Points On Government's Plan To Rescue Troubled Financial Giant
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Play CBS Video Video Eye To Eye: Citigroup Bailout Former Securities and Exchange Commission chairman Arthur Levitt speaks with Harry Smith about the U.S. government's plans for a multi-billion dollar rescue bailout package for struggling Citibank.
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Video CitiGroup's Close Call With 200 million customer accounts worldwide, Citigroup is being rescued by the government from the brink of collapse. Kelly Wallace reports.
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Video Team Obama Sets Economy Plan President-elect Barack Obama is setting the tone for his economic plans, reports Dean Reynolds. Nobel Laureate Paul Krugman speaks to Maggie Rodriguez about the economy.
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(AP / CBS)
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Interactive Inside The Fed A history of the Federal Reserve, glossary of terms and a look at changing interest rates.
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In-Depth Meltdown Primer Questions and answers regarding various aspects of the current economic crisis.
The surge gave the market its first two-day advance since Oct. 30-31 and the Dow's biggest two-day percentage gain since October 1987; the 891-point rise over the two sessions also wiped out an 872-point plunge over the course of Wednesday and Thursday. Although investors sensed late last week that a rescue of Citigroup was forthcoming, investors nonetheless were heartened, even emboldened, by the U.S. government's decision late Sunday to invest $20 billion in Citigroup and guarantee $306 billion in risky assets.
Wall Street's enthusiasm grew not only because the bailout answered questions about Citigroup but also because many observers saw the move as offering as a model for how the government might carry out other bank stabilizations.
"This could be the template for saving the banks," said Scott Bleier, founder of market advisory service CreateCapital.com.
"The government has taken a new quill out, they've gone to where they didn't go before in terms of trying to secure the system," Bleier said. "Some of that vulnerability seems to be gone now."
Still, the market remains wary, especially with the economy in a serious downturn. The Dow was up more than 500 points in the last hour before giving up some of its gains - many investors wanted to take some money off the table before the next bit of bad news arrives. And the market has frequently done sharp reversals since the start of the credit crisis 15 months ago.
The government is injecting money into Citigroup with strings attached, reports CBS News correspondent Kelly Wallace.
The money will come in exchange for shares that will pay eight percent back to the taxpayer; Citigroup also agrees to place limits on executive pay and help homeowners facing foreclosure, reports Wallace. But some analysts say the bailout doesn't go far enough - and that the company will need much more from Uncle Sam.
"The $20 billion is about 10 percent of what Citicorp needs to get back to financial health," said Sean Egan of Egan-Jones Ratings Company. "They need about 200 billion, they got 20."
The efforts from the Treasury Department, the Federal Reserve and the Federal Deposit Insurance Corp. to help stabilize Citigroup are only the latest this year to support a banking system troubled by bad debt and flagging confidence. Besides implementing its $700 billion bailout plan for the overall financial industry, the government has bailed out insurance giant American International Group Inc. and taken over lenders Fannie Mae and Freddie Mac.
"You're definitely seeing relief," said Anthony Conroy, managing director and head trader for BNY ConvergEx Group. "More than anything, the Fed repaired some of the psychological damage that was being done to the sector. I think the Fed is poised to do whatever they possibly can to help the financials get through the current turmoil."
"Not all banks are unhealthy, so knowing that the Fed is there is enough," Conroy said.
According to preliminary calculations, the Dow rose 396.97, or 4.93 percent, to 8,443.39.
Broader stock indicators also jumped. The Standard & Poor's 500 index advanced 51.78, or 6.47 percent, to 851.81, and the Nasdaq composite index rose 87.67, or 6.33 percent, to 1,472.02.
The Russell 2000 index of smaller companies rose 30.25, or 7.44 percent, to 436.79.
The rise in stocks follows a rally Friday that saw the Dow industrials jump 494 points, or 6.5 percent. The other major indexes also rose sharply. Still, stocks ended the week with a loss after heavy selling Wednesday and Thursday.
"I think it's a little bit of confidence coming back into the system right now," said Harry Clark, chief executive of Clark Capital Management. He contends the market began to form a bottom in an Oct. 10 sell-off and on Thursday made further headway toward setting a low that could give way to a rally.
Bond prices were mixed Monday as investors examined the government's bailout plan for Citigroup. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 3.36 percent from 3.20 percent late Friday.
The Treasury bill market showed continuing high demand, a sign of investors' caution. The yield on the three-month T-bill, considered one of the safest investments, fell to 0.02 percent from 0.04 percent late Friday.
The dollar was mostly lower against other major currencies, while gold prices rose.
Light, sweet crude rose $4.61 to $54.54 on the New York Mercantile Exchange.
Jim Baird, chief investment strategist with Plante Moran Financial Advisors, said the uncertainty over whether the government's cocktail of direct investments in financial houses and support of debt obligations will prove effective has led to recent stock market volatility. He warned, however, that the concerns about banks and the broader economy are likely to continue, he said.
"Just the sheer breadth of potential outcomes is very, very wide which I think makes it difficult for investors to determine how do you play it from here."
Stocks briefly came off their highs of the session in the middle of the session, with the Dow paring its gain from 300 points to 200 points, as President-elect Obama formally named his economic team but didn't offer specifics of an economic stimulus package nor state that he would push back a plan to raise taxes on the richest Americans. He reiterated his goal of creating 2.5 million jobs during the next two years.
Alan Lancz, director at investment research group LanczGlobal, said that while the market might have wanted a firmer commitment against raising taxes, it was too soon for Obama to outline specifics. Lancz expects the new administration wouldn't rush to implement the hikes if the economy appeared too weak.
"There's so many balls in the air right now he'd be foolish to make specific comments," Lancz said, noting that the economic picture could change greatly by Inauguration Day, which is Jan. 20.
Wall Street shrugged off a larger-than-expected drop in sales of existing homes last month as investors instead focus on the government's plans for the financial sector. And while the housing numbers fell short of expectations, Wall Street expected sales would fall sharply after last month's upheaval in the financial markets.
The National Association of Realtors says sales of existing homes fell 3.1 percent to a seasonally adjusted annual rate of 4.98 million in October. That's down from 5.14 million in September.
Citicorp's stock shot up nearly 60 percent Monday to just under $6 but the stock market rally might be short-lived -- shares of other major U.S. banks like Bank of America and JPMorgan Chase have lost more than 50 percent this year, reports Wallace.
Advancing issues outnumbered decliners by about 7 to 1 on the New York Stock Exchange, where volume came to 2.04 billion shares.
Overseas, Britain's FTSE 100 jumped 9.84 percent, Germany's DAX index surged 10.34 percent, and France's CAC-40 rose 10.09 percent. Hong Kong's Hang Seng index fell 1.59 percent; markets in Japan were closed for a holiday.
© MMVIII, CBS Interactive Inc. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed. The Associated Press contributed to this report.
Best-selling author Mitch Albom on his first nonfiction work since "Tuesdays with Morrie."
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See all 57 CommentsFED LENDS OUR $ TO BANKS FOR 1% (PLUS) WE BORROW FROM BANKS @ 10 TO 20% (PLUS) 8% TAXES (EQUALS) WE FOREVER LOSE (PLUS) FED & BANKS WIN (MINUS) TRUTH (EQUALS) DEPRESSION (TIMES) MORE LIES (EQUALS) POLITICIANS (PLUS) INVESTORS (DIVIDED BY) GREED (MINUS) LAW (MINUS) GOD (EQUALS) REVOLUTION!
EQUATION EXPLAINED:
YEARS AGO PEOPLE HAD TO CHOOSE-MORTGAGE PAYMENTS OR GAS FOR CARS. THEY CHOSE GAS-MORTGAGE INDUSRTY CRUMBLED-FED SAYS FAULTY PAPER AGREEMENT BETWEEN BANKS AND INVESTORS CAUSED IT-HIGHLY PAID FEDERAL ECONOMIC GURUS LOOKED THE OTHER WAY-OIL COMPANIES REAPED $60 TO $80 MILLION A YEAR (TIMES) 10 YEARS = $800 MILLION (ONE COMPANY ALONE)-FAILOUT PLAN IS NOT ENOUGH%u2026 FORESIGHT IS AS GOOD AS HINDSIGHT OR %u2018DEFAULT MORTGAGE SWAP%u2019 IS INVISIBLE-HAVE CONFIDENCE, THE PEOPLE WILL PAY.
FAILOUT PLAN WAS TO BAIL OUT ILLEGAL IMMIGRANTS WHO BOUGHT AMERICAN SOIL VIA FANNIE AND FREDDIE-THEY GOT BAILED OUT-PLAN NOT WORKING FOR ANYONE ELSE. AFTER GOV%u2019T APPROVAL & MAE, MAC BAILOUT - GURUS CHANGE - INVESTS IN BANKS & INDUSTRY INSTEAD OF HELPING PEOPLE.
ABORTION IS OK-BILL IS ON FUTURE GENERATIONS THAT WILL BE KILLED-NOW THEY ROB RETIREMENT EGGS.
WHY DO WE HAVE AN ELECTORAL REVOLUTION? WANT CHANGE? WILL IT COME FROM POLITICIANS WHO ADMITTEDLY CREATED IT?
FREE MARKET ECONOMY-PRIVATIZE GAINS-SOCALIZE LOSSES!
NO NEW REGULATIONS!-THROW MONEY AT IT!-BANKRUPT AMERICA-MAKE WAY FOR THE AMERO!
THIS IS A BALANCED BUDGET-FOR THE GREEDY!
They did this to the bailout of Chrysler back in the 70''''s and forced everybody to buy ''''unleaded'''' gasoline cars with catalyc converters.
Obama is the new ''''figure-head'''' to usher in a switch to ''''hydrogen'''' fuel based cars and most of the government sponsored jobs will be to replace gasoline fuel pumps with ''''hydrogen'''' fuel pumps.
This will force everyone to buy these new smaller ''''Reliant K'''' type cars that will cost 3 times more and the interest buyers will pay every year can be deducted from your taxes like a mortgage.
It will work but don''''t pretend to fool me into thinking that this a ''''brand new idea'''', because it has been in the works for decades by these ''''global planeers''''.
It''''s the same model they used for ''''tech bubble'''' back in the 90''''s that forced everybody to update their computers every year until Y2K and replace lan-lines with cell phones
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Good post. Posted by alphaa10000 at 04:36 AM : Nov 25, 2008
Alpha I agree we need nationalism of the banking system if only to protect the interests of the country from the shysters. We''re rewarding the same Wall Street financiers (you''ll see some of them on CNBC) who put us in this mess over their recklessness and greed (def: a rapacious desire for more than one needs or deserves.)
The government hacks are not asking for an accounting where the bailout goes, and not holding anyone accountable, except for the citizens who will eventually pay for all this with lost jobs and hyper inflation while the greed mongers count their new supply of shekels and make new deals.
This cabal is majorly responsible (directly or indirectly) for the deterioration of the US middle class and the indebtedness of the US treasury and the loss of our manufacturing economy.
Aren''t Citigroup''s largest stockholders from Saudi Arabia?
.....???????
The GM genocide: Thousands of Indian farmers are committing suicide after using genetically modified crops.
''When Prince Charles claimed thousands of Indian farmers were killing themselves after using GM crops, he was branded a scaremonger. In fact, as this chilling dispatch reveals, it''s even WORSE than he feared.''
This can happen to USA, Canada, UK, Australia, South Africa, NZ etc ---------------GM SEED USE MUST BE STOPPED.---------------------
Indian Ministry of Agriculture..confirms ..a HUGE HUMANITARIAN CRISIS, more than 1,000 farmers kill themselves each month!!!!!!!!
Prince Charles is setting up a charity, the Bhumi Vardaan Foundation, to help those affected and promote organic Indian crops instead of GM. India''s farmers are also starting to fight back. As well as taking GM seed distributors hostage and staging mass protests, one state government is taking legal action against Monsanto for the exorbitant costs of GM seeds.
PLEASE READ and Tell Friends and Family- http://tinyurl.com/6ehp3z
The GM genocide: Thousands of Indian farmers are committing suicide after using genetically modified crops.
''When Prince Charles claimed thousands of Indian farmers were killing themselves after using GM crops, he was branded a scaremonger. In fact, as this chilling dispatch reveals, it''s even WORSE than he feared.''
This can happen to USA, Canada, UK, Australia, South Africa, NZ etc ---------------GM SEED USE MUST BE STOPPED.---------------------
Indian Ministry of Agriculture..confirms ..a HUGE HUMANITARIAN CRISIS, more than 1,000 farmers kill themselves each month!!!!!!!!
Prince Charles is setting up a charity, the Bhumi Vardaan Foundation, to help those affected and promote organic Indian crops instead of GM. India''s farmers are also starting to fight back. As well as taking GM seed distributors hostage and staging mass protests, one state government is taking legal action against Monsanto for the exorbitant costs of GM seeds.
PLEASE READ and Tell Friends and Family- http://tinyurl.com/6ehp3z
Posted by txgrouch2007 at 10:52 PM : Nov 24, 2008
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Didn''t you know this is the plan. If you can tolerate it Charlotte Iserbyt puts it best...Speaking At The Zombie Country Conference
youtube.com/watch?v=PYNSXJbdchc
"We cannot expect Americans to jump from capitalism to Communism, but we can assist their elected leaders in giving Americans doses of socialism until they suddenly awake to find out they have Communism.'''' - NIKITA KHRUSHCHEV: Premier of the Soviet Union 1958-1964.
Posted by txgrouch2007 at 10:52 PM : Nov 24, 2008
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Didn''t you know this is the plan. If you can tolerate it Charlotte Iserbyt puts it best...Speaking At The Zombie Country Conference
youtube.com/watch?v=PYNSXJbdchc
"We cannot expect Americans to jump from capitalism to Communism, but we can assist their elected leaders in giving Americans doses of socialism until they suddenly awake to find out they have Communism.'''' - NIKITA KHRUSHCHEV: Premier of the Soviet Union 1958-1964.
Posted by txgrouch2007 at 10:52 PM : Nov 24, 2008
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Didn''t you know this is the plan. If you can tolerate it Charlotte Iserbyt puts it best...Speaking At The Zombie Country Conference
youtube.com/watch?v=PYNSXJbdchc
"We cannot expect Americans to jump from capitalism to Communism, but we can assist their elected leaders in giving Americans doses of socialism until they suddenly awake to find out they have Communism.'''' - NIKITA KHRUSHCHEV: Premier of the Soviet Union 1958-1964.
Posted by txgrouch2007 at 10:52 PM : Nov 24, 2008
-----------------------
Didn''t you know this is the plan. If you can tolerate it Charlotte Iserbyt puts it best...Speaking At The Zombie Country Conference
youtube.com/watch?v=PYNSXJbdchc
"We cannot expect Americans to jump from capitalism to Communism, but we can assist their elected leaders in giving Americans doses of socialism until they suddenly awake to find out they have Communism.'''' - NIKITA KHRUSHCHEV: Premier of the Soviet Union 1958-1964.
Posted by txgrouch2007 at 10:52 PM : Nov 24, 2008
-----------------------
Didn''t you know this is the plan. If you can tolerate it Charlotte Iserbyt puts it best...Speaking At The Zombie Country Conference
youtube.com/watch?v=PYNSXJbdchc
"We cannot expect Americans to jump from capitalism to Communism, but we can assist their elected leaders in giving Americans doses of socialism until they suddenly awake to find out they have Communism.'''' - NIKITA KHRUSHCHEV: Premier of the Soviet Union 1958-1964.
This is video of a Sheep really believing Obama''s Hype... I guarantee you will be laughing in 30seconds
youtube.com/watch?v=1cbUlW5MMHE
Further proof of brainwashing with Obama''s Hitler Youth
youtube.com/watch?v=WqF19Phn0Og
This is video of a Sheep really believing Obama''s Hype... I guarantee you will be laughing in 30seconds
youtube.com/watch?v=1cbUlW5MMHE
Angry mobs of citizens are surrounding the PM''s "temporary office" at the airport after he was forced to flee his main office.
WHY ISN''T THAT HAPPENING HERE IN THE USA????
Because the masses here are brainwashed sheep.
Posted by ChloeMont at 10:36 PM : Nov 24, 2008
Better be careful. Last time something like that happened in Columbine (it was syphillis there), some kids bombed the school and then shot themselves - which made everybody FORGET THE SYPHILLIS AND THE BOMBS and use it as more anti-gun propaganda...
All it will take is some local going on a shooting spree, and everyone will forget all about the heroin while they go on yet another anti-gun witch hunt.
Posted by ChloeMont at 10:31 PM : Nov 24, 2008
LOL! Oh, you saw the Chemtrails thing, too.
A "dessert" island? An island made of cake and ice cream, with Chemtrails topping and oodles of fluoride to keep the cavities away. Might need some tummy medicine after eating all those sweets.
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