Market Recap - February 23, 2009

The markets closed today at the lowest levels since May of 1997. The Dow Jones industrial average dropped 250 points, or 3.41%, to settle at 7114. The Standard & Poor's 500 index fell 26.72 points, or 3.47%, to end the day at 743.33. A major lack of clarity has led investors to fear the future, and the actions of major indexes today reflect their concern.

The government attempted to pacify worries about the struggling financial system today by announcing new plans to help banks. Under the most recent plan, the government would buy convertible preferred shares (preferred shares that can be converted into common shares) to inject capital into needy banks. If executed, the plan could leave the government with up to 40% ownership of Citigroup (C).

While the announcement shows a solid initiative to make improvements, the increased government involvement is also scaring investors. Alarming rumors of complete government takeovers and nationalization of banks have been widespread. The White House and President Obama have maintained their backing of a privately held banking system to ease the worries.

Amidst the announcements of financial stimulus, Obama also publicized his plan to cut the government's annual budget deficit in half by the end of his four-year term. President Obama inherited an estimated yearly deficit of $1.3 trillion from Past President Bush. The total current government debt is estimated to be $10.8 trillion. As a country, we're paying over $250 billion in interest on the national debt every year. Obama plans on lowering the debt and slashing the deficit by phasing out the Iraq war, raising taxes on the wealthy, and making government programs more efficient.

Still, announcements of government aid and proposals were unable to quell the overwhelming amount of pessimism on Wall Street. The gloomy mood will be here to stay until the economy and Main Street show signs of improvement.

Until tomorrow,

-Matt Schwartz

College Trillionaires