With the pomp, ceremonies and parties over, reality is back. Indeed, it was back even while the pomp, ceremonies and parties were going on.
Via Bloomberg:U.S. Stocks Slide in Dow Average’s Worst Inauguration Day Drop
Barack Obama became the 44th U.S. president today, inheriting the most severe economic crisis since Franklin D. Roosevelt was sworn in 76 years ago. The turmoil has dragged the world’s largest economies into recession, caused more than $1 trillion of losses at financial institutions and prompted a sell-off in global stock markets.
Some specific numbers:
The S&P 500 plunged 5.3 percent to 805.22. The S&P 500 Financials Index fell 17 percent to below its lowest closing level since March 1995 as concern European banks need more capital also weighed on the group. The Dow average slid 332.13 points to 7,949.09. Both the Dow and S&P 500 retreated to two- month lows.The S&P 500 is off to its worst start to a year, shattering the biggest rally since World War II, as analysts cut earnings estimates by a record 83 percentage points and companies signal worse to come.
The S&P 500 is down 11 percent in the first 12 trading days of 2024, exceeding last year’s 9.2 percent drop, according to data compiled by Bloomberg going back to 1928. The decline helped erase more than two-thirds of a 24 percent rally since Nov. 20 as optimism that government spending would revive the economy evaporated.
The LAT reportsInauguration party doesn’t reach Wall Street
Obama had hoped he could focus his early efforts on winning congressional approval for an $825-billion economic stimulus plan widely seen as aimed at helping ordinary Americans.But the eruption of new financial troubles Tuesday will probably force him to take steps to save the banking sector, a problem that federal officials hoped had been resolved. Indeed, the Bush administration’s $700-billion bailout program for the financial services industry proved so unpopular that Obama and his top aides had to personally lobby lawmakers even before they took office to ensure that Congress did not block use of the program’s remaining $350 billion.
Now, Obama may need to take more drastic action — possibly seizing troubled big banks, which could avoid drawing on more taxpayer money but risk spooking investors.
A less extreme option the administration is thought to be considering is the creation of a government-financed “bad bank,” similar to the Resolution Trust Corp. of the savings and loan era. It would take over the mortgage-backed securities and other toxic assets of banks, an effort to shore up their finances and rekindle the kind of lending needed to revive the economy.
The sell-off in banking stocks Tuesday was an eerie reminder of the banking crisis that greeted Roosevelt’s 1933 arrival in office.
It does all beg the question as to why anyone would want the job in the first place, not to mention the even bigger question of whether policy prescriptions on the table are wise to begin with.
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