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A Changed Wall Street Hopes for Positive SIgns
Posted on Sep 21, 2008 by Mike Geyer
Even though the Dow Jones may be where it was a week ago, Wall Street is a completely different place. In a matter of days, Lehman Brothers Holdings went into bankruptcy, Merrill Lynch was snapped up by Bank of America and the insurer AIG was bailed out by the government. And now the government is planning to assume banks’ risky assets. Overall, investors are relieved about the intervention but they remain very cautious about the outlook for the financial markets and the economy. People who remember the savings & loan crisis in the late 1980’s remember that it was followed by about 3 years of recession. A government rescue of the banks won’t prevent them from tightening their lending standards further. When people and businesses have a hard time getting loans, it tends to stunt economic growth. Some investors believe that the anemic economy could get worse before it improves thereby keeping the stock market jittery for a while until it sees real signs of strength. The National Association of Realtors anticipated to post a decrease in August’s existing home sales and the Commerce Department expected to report a decline in August’s new home sales.
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