Oct 13, 2008 11:43 pm US/Eastern
WHEW: Stock Market Rebound Brings Investor Relief
U.S. Government To Buy Parts Of Major American Banks; Move Bolsters Economic Confidence For At Least 1 Day
Reporting
Lou Young
NEW YORK (CBS) ―
For the first time in nine trading days the closing bell on Monday gave us something to smile about. All market averages finished up sharply, with the Dow Jones Industrials gaining a full 11 percent in value, the largest one-day jump in 75 years.
For Nancy Donahue, staring at the numbers through the Nasdaq Market site window in Times Square, it was great news.
"My 401K's getting better every minute," she observed.
She's right. Even if the overall market is still down 13 percent for the month, Monday's numbers at least indicate the bleeding may have slowed.
A day trader with the improbable name of Greg Gamester seemed especially pleased at the development. On vacation to New York from his home in Tampa, Fla., Greg told CBS 2 HD: "I was buying a little (stock) on Friday, so it's nice to see it going up."
He was so confident he said he actually used a little margin buying to pick up bargains, meaning he borrowed money to buy stocks while the market seemed to be in freefall. It's the type of activity that requires an iron stomach. In fact, market experts told CBS 2 HD on Friday there were signs of investor confidence at work after a full week of bad news, but no one was sure if it would last through the weekend.
It apparently did, helped considerably by new government details about the $700 billion bailout package passed by Congress 10 days ago.
The U.S. government has now decided it will actually buy parts of major American banks in order to immediately infuse them with cash.
The heads of J.P. Morgan Chase, Morgan Stanley, Citigroup and Bank of America were all summoned to the Treasury Department to hear details of what amounts to a partial nationalization of the banking industry.
Neel Kashkari, the new Assistant Treasury Secretary for Financial Stability, assured bankers, though, that they are getting a good deal.
"The equity purchase program," he said, "will be voluntary and designed with attractive terms to encourage participation from healthy institutions."
The U.S. program is expected to follow the model set by British Prime Minister Gordon Brown, who is advocating buying stakes in leading financial institutions. The French and German governments have also pledged roughly $1 trillion dollars to assist in their respective countries. Direct ownership stakes means the banks will get money right away rather than have to wait weeks or months for the buy up of so-called toxic mortgage properties.
Investors believe the move will get the economy moving quickly. That should translate to higher stock prices.
On the street, Sherry Cook, visiting Manhattan from upstate Niagara Falls, certainly was hoping so.
"When it first went down," she said of the market, "my husband and I were like 'we're not going to be able to retire for a long time,' so we're hoping things improve so that we can retire in the next 10 years.
"There's a great deal at stake for all of us."
(© MMIX, CBS Broadcasting Inc. All Rights Reserved.)
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