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Talks about bank nationalization in the middle of the foreclosure crisis sent stocks spinning downwards



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By : Adam Sanderson    99 or more times read
At one point there were fears and hopes that the banks would be nationalized but Timothy Geithner did not take that extreme step.

He laid out a grandiose plan but left many questions hanging. The thorniest subjects continued to be skirted. The key to the issue was Obama government being able to lure in massive private investment. But Geithner remained vague because there was a marked coolness among the investors. This led to stocks falling by 5%.

The government now came forward with ‘stress tests’ for 19 of the biggest banks in USA. The idea was to find out if they had sufficient capital to fall back on if the economy worsened. The results as examined by the regulators were not good.

While Wall Street concentrated on the banks, Obama turned towards the foreclosure crisis and set in motion a plan costing $275 billion. The measure targeted 9 million homeowners having trouble with their mortgages. Incentives were offered not only to lenders and servicers but also to borrowers. For each loan modification and refinancing there were carrots and the borrowers too were promised rewards for remaining current on the mortgages. Initially there were kudos for the plan but critics warned this would not help a good number of borrowers who were underwater – their loan amount being more than the worth of the house.

Meanwhile there were strong feelings gathering momentum that in attempting to mitigate the crisis the government was rewarding those who had behaved badly. The bleak winter season was not being followed by a warm spring. Very few were being helped by the plan. The economy shrunk at a worse rate than apprehended previously. It declined by an annual rate of 6.2% during the last quarter of 2008.

The government increased in stakes with Citigroup to 38% causing fears about bank nationalization to resurge. Credit became hard to get again and stocks fell to the lowest point in 12 years. The international situation was not much better.

International conditions were not much improved with the countries in Eastern Europe that had adopted American capitalism beginning to totter. Western banks began to slide as trade levels fell. Chinese exports were affected with drop in American consumer sales. Countries began to build trade barriers.

But just as the ship was sinking suddenly there were good tidings. Hope trickled in fed by positive economic reports from government and also private research entities.
Adam Sanderson , has been working on foreclosurerepos.com studying the foreclosures market, helping buyers on the finer points of foreclosure homes for sale. Try to visit foreclosurerepos.com and begin your foreclosures by state search.

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