Obama is ‘Confident’ Bank Asset Plan Will Work
President Barack Obama said he is “very confident” the administration’s plan to purchase toxic assets from banks will unlock credit markets and that there already are signs of a thaw in the housing market. “This is one more element that is going to be absolutely critical in getting credit flowing again,” said the president and added the plan’s primary purpose is “stabilizing the financial system so that banks are lending again, the secondary markets are working again.”
Geithner announced a public-private partnership plan to purchase as much as $1 trillion in devalued real-estate assets and other securities, using $75 billion to $100 billion of the Treasury’s remaining bank-rescue funds.
Market Response
Investors gave a overwhelming endorsement to the initiative as bank shares rose, led by Citigroup Inc. and Bank of America Corp., after the Treasury announcement.
The Dow, up 241 at 8017 in the past week, was up 21 percent in the past four weeks, its best move of that duration since May, 1933. It was also the Dow’s first close above 8,000 in two months. The S&P 500 rose 26 points, or 3.3 percent for the week, to 842. The Nasdaq rose 76 points, or 5 percent to 1621.
Investors last week poured money into the financials, which were best performers with a 6.4 percent gains, but they also bought consumer discretionary stocks, which gained 6.3 percent. Defensive issues were the worst performers, with health care down 1.6 percent and consumer staples down a slight 0.1 percent.
Real Estate markets follow the reponse?
The enthusiasm in the stock market seems to have begun spilling over to real estate. Real estate stocks have also seen significant gains over the pass weeks, as investors are betting on a real estate turn around.
“Prices are so low, we’re starting to see that,” says Marc Savitt, a realtor there for a quarter of a century. “In our area, you’re at the bottom.”
Savitt, is the president of the National Association Of Mortgage Brokers, and may seem a little overly optimistic. But he is hardly alone in sensing a long-awaited bottom in the real estate market.