New York Stock Exchange
NEW YORK – The Dow Jones Industrial Average dropped nearly 400 points today, closing below 8,000 in a sharp rebuke of Obama administration economics.
The market dropped nearly 200 points while Treasury Secretary Timothy Geithner presented on live television the administration’s revamped bank rescue plan.
The Dow dropped further on news that the Senate passed the president’s massive $838 billion deficit-spending economic stimulus plan in a 61 to 37 vote that included only three Republicans, Sen. Arlen Specter of Pennsylvania, and Sens. Olympia Snowe and Susan Collins of Maine.
Investors expected Geithner to explain how the second $350 billion in congressionally approved TARP funds would be spent.
Instead, Geithner suggested the Federal Reserve and Treasury were considering making trillions available to handle the financial crisis, without clearly specifying where the money would come from.
Investors appeared to react negatively at the vagueness of Geithner’s plans, as well as his disclosure that the Federal Reserve and Treasury were planning to use as much as $1.5 trillion more, either to bail out troubled banks with more cash infusions or to buy toxic assets from the portfolios of troubled financial institutions.
Geithner also suggested Treasury would create another separate $500 billion fund to buy up toxic financial institution assets in a “good bank/bad bank” structure, while opening up another $1 trillion to reopen credit markets for consumers, including auto buyers, students, small businesses and commercial loans.
Throughout the trading day, rumors circulated that the Obama administration was creating Federal Reserve and Treasury obligations that could total as much as $9 trillion to resolve the toxic asset problem with banks and brokerage firms.
Fox News reported the National Republican Trust PAC put out a statement today claiming it would provide financial support for primary challengers to Sens. Specter, Snowe and Collins in retaliation for their breaking ranks and voting for the Obama economic stimulus plan.
“Republican Senators are on notice,” the group’s director Scott Wheeler said in a statement reported by Fox News. “If they support the stimulus package we will make sure every voter in their state knows how they tried to further bankrupt voters in an already bad economy.”
After the Senate vote, Senate Minority Leader Mitch McConnell told reporters the Obama economic stimulus plan would cause government spending as a percentage of gross domestic product, or GDP, to rise from approximately 21 percent last year, to nearly 40 percent in 2010, levels comparable to Europe.
“The president was right to call for a stimulus,” McConnell told the Washington Post, “but this bill misses the mark.”
“It’s full of waste,” McConnell said. “We have no assurance it will create jobs or revive the economy. The only thing we know for sure is that it increases our debt and locks in bigger and bigger interest payments every single year. In short, we’re taking an enormous risk – an enormous risk – with other people’s money. On behalf of taxpayers, I won’t take that risk.”
WND has reported that the Obama administration plans to issue record levels of debt in the next two years – up to $2.5 trillion this year and as much as $4 trillion in 2010.
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