Stock Market Information

Well it appears that the markets were pleased at the news that the Federal Reserve was ready to create an entity that will pick up on the bad debts on a number of banks. Questions remain though as to how this will play out exactly, and what the consequences will be for the government, which is already running at a fairly steady deficit clip each year.

In addition, there’s still other banks out there that could go under. Washington Mutual, for example, is looking for a buyer, but seeing as it’s balance sheet appears to be nothing shot of a train wreck, it may be tough for them to find anyone else but the government willing to step in and give them the capital they so desperately need. This event could trigger another sell off in an already volatile market. It should be noted, however, that there is a historic precedent here:

The report of a broader government bailout proved more reassuring to investors than moves before the opening bell Thursday by the Federal Reserve and other major central banks to inject as much as $180 billion into global money markets. The moves were an attempt to keep the credit crisis from worsening; the Fed added another $55 billion in overnight loans Thursday.

But it was only the prospect of a more comprehensive vehicle to sweep up bad debt that emboldened investors. Congress established the RTC in 1989 to buy $394 billion worth of real estate, mortgages and other assets of hundreds of failed savings-and-loan institutions. The corporation operated for several years disposing of the associations’ assets, and then went out of business.