Chris
September 18th, 2008, 05:08 PM
Stocks surge on report of entity for bad debt
Thursday September 18, 5:03 pm ET
By Tim Paradis, AP Business Writer
Stocks end sharply higher on report that government will create entity to hold banks' debt
NEW YORK (AP) -- Wall Street rallied in a stunning late-session turnaround Thursday, shooting higher and hurtling the Dow Jones industrials up 400 points following a report that the federal government might create an entity to absorb banks' bad debt. The report also cooled investors' fervor for the safest types of investments like government debt. The report that Treasury Secretary Henry Paulson is considering the formation of a vehicle like the Resolution Trust Corp. that was set up during the savings and loan crisis of the late 1980s and early 1990s left previously solemn investors ebullient. Wall Street hoped a huge federal intervention could help financial institutions jettison bad mortgage debt and stop the drain on capital that has already taken down companies including Bear Stearns Cos. and Lehman Brothers Holdings Inc.
Worries about financial landmines on companies' books have essentially crippled parts of the world's financial markets in recent days and led to the intense volatility in the markets this week. "It's going to take a lot of the bad debt off the balance sheets of these companies," said Scott Fullman, director of derivatives investment strategy for WJB Capital Group in New York, commenting on the possibilities of an entity akin to the RTC. It could alleviate many of the pressures causing the credit crisis, he said, and reopen moribund credit markets. But Fullman noted, "the devil's in the details."
more............http://biz.yahoo.com/ap/080918/wall_street.html
Thursday September 18, 5:03 pm ET
By Tim Paradis, AP Business Writer
Stocks end sharply higher on report that government will create entity to hold banks' debt
NEW YORK (AP) -- Wall Street rallied in a stunning late-session turnaround Thursday, shooting higher and hurtling the Dow Jones industrials up 400 points following a report that the federal government might create an entity to absorb banks' bad debt. The report also cooled investors' fervor for the safest types of investments like government debt. The report that Treasury Secretary Henry Paulson is considering the formation of a vehicle like the Resolution Trust Corp. that was set up during the savings and loan crisis of the late 1980s and early 1990s left previously solemn investors ebullient. Wall Street hoped a huge federal intervention could help financial institutions jettison bad mortgage debt and stop the drain on capital that has already taken down companies including Bear Stearns Cos. and Lehman Brothers Holdings Inc.
Worries about financial landmines on companies' books have essentially crippled parts of the world's financial markets in recent days and led to the intense volatility in the markets this week. "It's going to take a lot of the bad debt off the balance sheets of these companies," said Scott Fullman, director of derivatives investment strategy for WJB Capital Group in New York, commenting on the possibilities of an entity akin to the RTC. It could alleviate many of the pressures causing the credit crisis, he said, and reopen moribund credit markets. But Fullman noted, "the devil's in the details."
more............http://biz.yahoo.com/ap/080918/wall_street.html