Is the bailout not working?

October 7, 2008 4:59:48 PM PDT
Wall Street wasn't impressed by the moves to end the panic in the financial markets. The Dow Jones dropped another 500 points Tuesday to close at 9,447. [CHECK THE MARKETS: Get the latest numbers from Wall Street]
[FINANCIAL CRISES: From the Depression until today]
[DARK DAYS AHEAD: Bernancke's assessment]

Investors are worried about the Fed's warning and continue to wonder whether the rescue plan will really bail them out. So how is the plan expected to work?

If the economy is a ship taking on water, the bailout passed last week was supposed to help. But no one's grabbed a bucket yet to start throwing the water overboard. Despite their pleas to pass the bailout quickly, Wall Street doesn't seem to trust that it's really going to work. The market keeps going down.

Bell after bell after bell, it's just bad news.

"I haven't looked at my statement and I am afraid to do so," said Houstonian Tam Tran.

Since last week, the stock market's dropped nearly 1,700 points, shrinking your nest egg by 15 percent in one week.

We hear from the president to be patient.

"We have been through tough times before and we will come through this again," said President Bush on Tuesday.

But wait a second. Wasn't he the guy that was saying how important it was last week to pass the bailout and do it quickly?

"They're worried about their houses. They're worried about their small businesses. And the House of Representatives must listen to these voices and get this bill passed," he said.

Yeah, I thought I remembered that. The day Congress voted down the package, the market dropped 777 points. Then the day they passed the package, it dropped, too. What's going on here? And why isn't the bailout bailing anyone out?

"It's not to fix the market," said David Doherty with Raymond James and Associates. "I think people's expectations were ahead of themselves in terms of thinking it was going to turn right around."

Well, the $700 billion plan Congress passed last week was put together so fast, there's no real plan to implement it yet. So none of that $700 billion's been spent yet.

On Monday, theTreasury Department hung its help wanted sign, looking for money managers who will figure out how to buy $750 billion worth of worthless mortgages from banks. Until that happens, banks are stuck without a way to start lending money again. And if they're not loaning money, the economy isn't moving and most likely you're nestegg will keep getting smaller.

The U.S. Treasury Department is taking applications to work on the bailout until tomorrow and then they'll put together the details of this plan. In the meantime, the Federal Reserve announced a massive plan today to loan companies billions of dollars for short term needs.

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