Wall Street is rebounding for the second day in a row as investors react positively to the plan President Bush announced this morning before the opening bell. Iowa Senator Chuck Grassley says he’s glad to see the stock market soar again, but isn’t enthusiastic about the federal government spending $250-billion to buy stock in private banks.
Grassley says, "I don’t want to say it’s a better route because none of these routes are good, you know, having the government messing in the economy as much as they are in this credit crunch, but most of the economists tend to think that this sort of involvement is very, very necessary." President Bush says the government will be buying shares in nine of the nation’s leading banks, saying the actions are "not intended to take over the free market but to preserve it.’
Based on this morning’s immediate upturn in the market, Grassley says he hopes positive financial signs continue to pop up. "Congress anticipated buying up ‘bad paper,’ now referred to as ‘toxic paper,’ mortgage-backed securities, and take it off the market to unplug the pipeline of good credit that’s waiting to flow," Grassley says. The Federal Reserve also announced today it plans to start buying large quantities of short-term debt starting in just under two weeks.
Grassley says that’s an effort that should break through the credit clog that can hurt businesses and payrolls. Grassley says, "Whatever it takes to get the credit lines flowing is what needs to be done and this is the fastest way to get it done, in other words, billions of dollars can be put out of Treasury much faster buying preferred stock."
Plus, he says restrictions that were outlined in the bailout bill will automatically be imposed — no golden parachutes, $500,000 salary caps for executives, and other measures to protect the taxpayers.