Obama's bank rescue plan; China exports tumble; Australian fire clean-up continues; close vote in Israel; Afghan suicide bombings; Zimbabwe's leader sworn in
TOP OF THE AGENDA: Geithner Unveils Bank Rescue Plan
Treasury Secretary Timothy Geithner unveiled the Obama administration's latest plan to restart stalled credit markets, offering a mixture of capital injections into banks, expanded Federal Reserve lending, and a public-private partnership to buy troubled assets (WSJ). The plan, which could cost as much as $2.5 trillion, was far bigger than analysts predicted; it envisions a much broader government role in markets and banks than any time since the 1930s (NYT).
But despite much anticipation the plan was not well received. A perceived lack of details dismayed lawmakers (WSJ), and led to a steep sell-off on Wall Street (WashPost). Investors flocked to the safety net of gold following the Treasury announcement Tuesday, and the Dow Jones industrials average slipped 382 points, or 4.6 percent, closing below 8,000 points (AP).
Driving the unease, analysts say, are three key questions that Geithner left unanswered: How will banks with toxic debt survive? How will liquid assets be removed? And can the rapid decline in home prices-the drop that triggered the turmoil-be reversed? "Tim Geithner did a great job in painting the broad strokes of the problem and laying out general principles," Kenneth Rogoff, a former chief economist at the International Monetary Fund, told Bloomberg. "But it was a big disappointment not to have more details."
Meanwhile, the Senate approved President Obama's stimulus package. But even this measure faces a tough climb, as House and Senate lawmakers must agree on "final cuts" to a compromise package (Politico).
- Read Treasury Secretary Timothy Geithner's speech introducing the financial stability plan.
- NPR offers a Q&A analysis of what the bank rescue plan is, and how it will work.
- CFR's Brad Setser, writing on his Follow the Money blog, ponders the tough choices ahead for dealing with troubled banks.
PACIFIC RIM: Chinese Exports Tumble
China's exports fell by more than 17.5 percent in January compared to the previous year, the biggest decline in more than a decade (BBC). Imports also slipped, down more than 43 percent from the previous year. Analysts predict the trade fallout could bring widening factory closings and job losses.
Australia: Officials continue the macabre task of cleaning up after the deadliest wild fires in Australia's history. In all the fires, some of which may have been deliberately set, claimed at least 181 lives. In Marysville, north of Melbourne, fire officials estimate one-fifth of the town perished (The Australian).