This past month will surely make the history books, little comfort in that but our Government is taking some strong measures to basically keep the Financial Markets afloat.
First Treasury Secretary Hank Paulson announced that the US government will guarantee public ally offered money market funds that pays a fee. You can read his entire statement at http://www.treas.gov/press/releases/hp1149.htm. This helped dispel some of the fear and anxiety that is out there, as a result stocks around the world enjoyed a record day!
Secondly, since banks and the financial markets is stagnated with all the illiquid mortgage debts, the Federal Reserve stepped in to create a vehicle to buy these mortgage debts and will turn them into a liquid marketplace. How, details are still being worked on. This move should be a major help to the long-term housing and lending environment.
Lastly, the SEC has placed a ban on short selling in 799 financially related stocks. This ban will last through October 2nd and can be extended if needed in 30 day increments. Many short-selling has been placed as “naked-short selling” where the trader shorts a stock without the required step of buying it first! Lately this has intensified the downward spiral we’ve seen in financial institutions stock pricing and overall losses. These losses hurt banks and brokerage houses’ balance sheets and limits their ability to properly function.
These are wonderful moves – may not be a panacea for everything plaguing our economy and markets but it has immediately dispelled some of the fear and panic that was rampant. ‘..the crash phase of the Great Financial Crisis of 2008 would appear to be over.’ Stephen Stanley, RBS Greenwich Capital
Mad Money host on CNBC, Jim Cramer said he supported Paulson’s plan and he thinks the great depression 2 is avoided!
