Washington
03 October 2008
Volatile trading on U.S. financial markets ended in losses on Wall Street, after President George Bush signed a massive rescue plan for U.S. economy. From Washington, VOA's Kent Klein has more on that and Friday's other economic developments.
U.S. stock markets surged early Friday, in anticipation that the House of Representatives would pass a revised financial bailout plan. But after the bill passed and President Bush signed it, prices dropped. The Dow Jones Industrial Average finished Friday down 157 points, or 1.5 percent. The NASDAQ also lost 1.5 percent, and the S&P 500 slid 1.4 percent.
European stock markets finished higher on Friday, but markets in Asia were down.
London's Financial Times index was up two-and-a-quarter percent, the CAC 40 in Paris gained three percent, and the DAX in Frankfurt advanced 2.4 percent. Tokyo's Nikkei index lost two percent, and in Hong Kong the Hang Seng fell nearly three percent. The dollar was lower against the Japanese yen but gained against the euro.
Asia's central banks have invested billions of dollars in credit markets since the U.S. financial crisis started to spread in September.
The secretary general of the United Nations Conference on Trade and Development, Supachai Panitchpakdi, said Friday the rescue plan is only a first step towards major reform of the U.S. financial system.
"This is just to prevent the crisis from deepening - it doesn't mean that we've already succeeded in tackling the basic issues," he said. "So there needs to be a rethinking of the way that financial institutions have been managed and have been regulated in the United States and I think throughout the world."
The U.S. House of Representatives voted 263-to-171 to approve more than $700 billion in government spending to help stabilize the financial markets. Some lawmakers, like Democrat Barbara Lee of California, had voted against the bailout on Monday, but agreed to pass the enhanced legislation on Friday.
"We will not magically turn the economy around, reverse the rise in unemployment, or end this recession which we are in now," she said. "We must be honest about that. But I must err on the side of caution, so our seniors can have some confidence that their pensions are safe. And I hope that we will be able to help prevent this financial crisis from exacting an even bigger toll on the everyday lives of our constituents."
Others, like Republican Marilyn Musgrave of Colorado, remained unconvinced.
"Taxpayers for generations will pay for our haste, and there is no guarantee that they will ever see the benefits," she said. "We should not reward bad behavior. Wall Street will not have to learn its lesson, and we are not doing anything to keep them from running our economy into the ground again."
Almost all members of the House will be up for re-election in about a month, and mail, e-mail and telephone calls to their offices showed overwhelming opposition to the bailout.
President Bush signed the bill shortly after the vote. He thanked lawmakers from both parties for their support, and said the bill's passage sends a strong signal to markets around the world.
"We have shown the world that the United States of America will stabilize our financial markets and maintain a leading role in the global economy," he said.
One factor in Friday's losses on Wall Street was news from the U.S. Labor Department that the country lost 159,000 jobs in September. It was the biggest job loss in more than five years. The U.S. unemployment rate remained at 6.1 percent, largely because hundreds of thousands of people were leaving the workforce. The reduction in payrolls was much sharper than economists were predicting, and this was the ninth straight month that the country has lost jobs.
Stuart Hoffman, an economist with PNC Financial, says the job losses are a bad sign for the U.S. economy.
"This is a sign that the American worker is hurting," he said. "They are losing jobs, and the economy's recession, which we believe it has been in for a while, is getting worse, not better."
Meanwhile, two big U.S. banks are battling to take over the troubled bank Wachovia. Wells Fargo signed a $15 billion agreement Friday to buy the institution without government assistance. However, under a deal announced Monday, Citigroup would acquire Wachovia with the help of the Federal Deposit Insurance Corporation, which insisted Friday that the earlier agreement go forward.
Nancy Atkinson, senior analyst with the Itay Group, says Wells Fargo made Wachovia a better deal.
"Wells Fargo's financial standing is more secure than Citigroup's right now, and they are acquiring all of Wachovia, whereas Citi was excluding AG Edwards and Evergreen," she said.
The Federal Reserve says it has not yet had time to review the proposed sale to Wells Fargo.