This week: Adventures of a bailout plan
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Kai Ryssdal: It seems like I’ve been saying this every Friday for the past month or so, but man, this week was a doozy, wasn’t it? Bailout, no bailout, then bailout again. A thousand point swing in the Dow. And credit markets that still haven’t come up for air.
Diana Henriquez is with the New York Times. Andy Brooks is a trader at T. Rowe Price.
Hello to you both.
Andy Brooks: Hi Kai.
Diana Henriquez: Nice to see you Kai.
Ryssdal: Diana, let me start with you. Are we done now? Can the credit markets please just go about their business since this bill has passed?
Henriquez: I know, you never even wanted to know they existed did you Kai? Um, I don’t think so. I think it’s a start. The lack of confidence in the quality of assets on bank and other financial balance sheets I think will begin to be addressed by this bill. If that were the only problem, then I think we’d be in good shape, but you’re seeing a vast shift away from risk throughout the credit markets. An interesting number — since Sept. 15th the flow of institutional money into government money funds is up almost 45 percent. Now that means there’s a lot of money chasing those assets and not much money available to finance the necessary commercial paper needs and overnight repos and the other kind of cash management tools that kind of lubricate commerce every day.
Ryssdal: Andy let me ask you, from a practitioner’s point of view, about that confidence and risk profile. How are you feeling?
Brooks: Well, you know, this is a really difficult environment and I think we are anxious and sometimes scared and sometimes sort of perplexed — and all those emotions coming in together kind of sometimes perhaps explains the crazy markets we’ve seen. Investors aren’t sure what to do, people are concerned about their jobs, their houses, all kinds of things. And it’s that huge uncertainty that we’ve got to start working through. The House action today will help, but we’re not going to get an overnight fix.
Ryssdal: Diana, let me ask you to take a step back and look at the larger economic picture. Obviously this bill will go along with — the law now I guess, since the president has signed it — it will go a long way toward easing the credit markets. What about the larger economy though, and I’m thinking of today’s unemployment report, 159,000 jobs down last month?
Henriquez: Yeah, that’s bad and the latest in a string of bad numbers. The general consensus among economists now is that we’re in a recession, or as they say, the recession is baking in the oven, we just haven’t taken it out yet. The loss of jobs is particularly important, I think, from a financial market standpoint because of this lack of confidence. It isn’t just institutional investors who are nervous and worried, retail investors are too; they were a little late to understand what was happening, but I think that, you know, a 777-point plunge on Monday got their attention. So if we could get institutional confidence restored to some extent, as Andy said, I think that would be instructive.
Ryssdal: Andy, what’s your take away from this week — the one thing that you’re going to remember about this week?
Brooks: Well I think I’m probably going to remember how tenuous everything is in our world. You know, we really are interconnected globally and, you know, banks and credit and cash and lending and car purchases and retail inventory and, you know, your 401-K statement — we’re all in this stuff together and I think the take away for me is to realize how important it is to wake up every day and realize the glass is half full. And now’s not the time to run away and hide, now is the time to be careful and thoughtful and perhaps reacting and taking advantage of some of these cheap stocks and opportunities that are out there.
Ryssdal: Andy Brooks of T. Rowe Price in Baltimore and Diana Henriquez at the New York Times. Thank you both.
Henriquez: You’re welcome Kai.
Brooks: Our pleasure. Thank you.
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