U.S. Government Hopes Private Capital Will Help Fund Bank Rescue

One of the main issues affecting the economy, says the government, is that toxic assets remain on bank balance sheets to poison the outlook for many companies. In addition to floating ideas like a "bad bank", government leaders are back to the idea that investors and funds might help finance the bank rescue. Stock Market Funding reports on hopes for the bank rescue:

Administration officials said the plan, to be announced Tuesday, was likely to depend in part on the willingness of private investors other than banks — like hedge funds, private equity funds and perhaps even insurance companies — to buy the contaminating assets that wiped out the capital of many banks. The officials say they are counting on the profit motive to create a market for those assets. The government would guarantee a floor value, officials say, as a way to overcome investors' reluctance to buy them.

It will be interesting to see whether this guaranteed floor value will be enough to overcome concerns about the nature of these toxic assets, and whether private money can help rescue banks -- since trillions in public money hasn't done the trick so far.

Senate Passes Economic Stimulus Bill

The Senate passed its version of the economic stimulus bill today. However, it is far from a done deal. Now the Senate version needs to be reconciled with the House version of the economic stimulus bill. Mortgage News Daily reports on the differences between the two versions:

While both the Senate and House versions of the bill are similar in size, key differences remain in the size of the tax cuts and spending portions of the bill.

The House version also includes a $56 billion provision for local government spending on education, while the Senate bill includes $11.5 billion in auto purchase incentives, and $35.5 billion to spur home buying.
It appears that the economic stimulus bill has a way to go: Unlike in the House, though, three Senate Republicans crossed the aisle to get the provision passed.

One Issue Wall Street has with the Bank Rescue Plan: "Stress Test"

As the economy continues to dominate headlines -- and financial markets -- one of the big reasons that Wall Street rejected the Obama Administration bank rescue plan is coming to light. One of the key points to the plan is a "stress test" for banks.

Indeed, many argue that banks have been hiding the true extent of their losses; a stress test like the one proposed under the bank rescue plan would shed light on the issue, reports BloggingStocks:

This is exactly what the banks have been avoiding, that is, to come clean about their losses. Now the whole world will be able to see the extent to which these guys were leveraged out and the kinds of outrageous risks they took.
There is a bit of logic to why Wall Street wants this sort of thing kept fairly quiet. What would it do to confidence in the financial markets once the true situation was revealed in the light of day?

Compromise Nearing on Economic Stimulus Bill

Earlier this week, the Senate passed its own version of the economic stimulus bill. Since then, the House and the Senate have been working on a compromise between the two. While negotiations are not over yet, there are some key issues that have been agreed upon thus far with regard to the economic stimulus bill:

These items could be modified further, until a final compromise is reached. It will be interesting to see how the markets interpret the new economic stimulus package. Right now, though, risk aversion is the name of the game, and the U.S. dollar is gaining in forex trading.

Congress to Vote on Economic Stimulus Bill Today

After reaching a compromise regarding economic stimulus measures, Congress is preparing to vote on the much-debated bill today. There is a combination of government spending and tax cuts in the bill that are meant to help stimulate the economy.

On the expectation that the bill will, in fact, pass, risk appetite is making a cautious to the market. Indeed, even with the recent data out of the euro zone, the euro is holding steady in forex trading as traders consider moving away from safe haven currencies.

Of course, the economic stimulus bill isn't the only thing bringing a measure of optimism to markets; the government is also talking about further capital infusions to banks and subsidies for mortgages. The way the markets perceive these actions will have profound influence on how the U.S. dollar and other investments do in the coming weeks.