FED bailout! - just what the doctor ordered

By
Real Estate Agent with Homesmart Elite

Wall Street extended a huge rally Friday as investors stormed back into the market, relieved that the government plans to rescue banks from billions of dollars in bad debt.

The Dow Jones industrials rose more than 375 points, giving them a massive gain of more than 785 points over two days, and Treasurys fell as money flowed into equities.

 

A plan to help the banking industry could help alleviate the uncertainty that has been sending the markets into tumult over the past week. Lending has grinded to a virtual standstill in the wake of this week's bankruptcy of Lehman Brothers Holdings Inc. and the bailout of teetering insurer American International Group Inc.

The government took other steps Friday to restore stability to the financial system.

The Federal Reserve said it will expand its emergency lending and let commercial banks finance purchases of asset-backed paper from money market funds. The Fed will also buy short-term debt obligations issued by Fannie Mae, Freddie Mac and the Federal Home Loan Banks.

And to help calm investors' anxieties, the Treasury Department has decided to use a Depression-era fund to provide guarantees for U.S. money market mutual funds.

 

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Barbara Romeo

ABR, GRI, Professional Real Estate Consultant
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