Today President Bush signed into law a $700bn bailout plan(Actually closer to $850bn with plenty of Christmas treeing) to allow the Treasury department to buy up “toxic” assets from failing financial institutions. The DJIA immediately reacted by falling nearly 500 points by days end, to close –157 over open that day, and nearly 818 points lower than Monday’s open. Whether it was from the news that the jobless rate is rising (it’s ~6% now), or from the realization that now the government will have an even greater stake in the housing market, there’s no way of really knowing. However, the bill is passed, and, for once, it’s good to see the government act with decisive action, even if it is in conflict of interest or is completely lacking in important details, like how the money will be spent. What happens next will really determine if we have to repeat the bailout. In 5 years we can begin to recoup losses from the financial industry, but that could be thrown out of the window if the cost is too great, or if we have another bailout. Politicians are promising to enact tougher regulation on the market, which is part posturing, and part a realization that years of encouraging banks to lend out money to people with no hope of actually getting their money back is a bad idea.

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