Economic Outlook: Uncertain times

By ANTHONY HALL, United Press International  |  Jan. 25, 2010 at 8:00 AM
share with facebook
share with twitter

U.S. bankers are counting votes as well as money this week, looking over their shoulders at Washington, where stability seemed in short supply last week.

Markets tumbled for the final three sessions a week ago, the Dow Jones industrial average writing off 550 points Wednesday through Friday, with news from Washington bumping into (not to say hip-checking) a solid recovery that pulled the Dow Jones industrial average from a March low of 6,547.20 to 10,745.23 on Tuesday.

Signs of instability began Tuesday, when state senator Scott Brown took 52 percent of the vote in a special election in Massachusetts, which gave the long-time seat held by the late Sen. Ted Kennedy to the Republican party, breaking up the filibuster-proof Democratic majority in the U.S. Senate.

The vote immediately put Democrats on the defensive regarding the healthcare initiative and put pundits to work counting how much support was left for Federal Reserve Chairman Ben Bernanke, whose confirmation vote for a second term as chairman should come by the end of the month.

With an announcement that surprised many -- with timing many concluded was meant to counter the momentum the Republicans seemed suddenly to possess -- President Barack Obama proposed limiting the size of banks and the types of risks commercial banks could take with money insured by the federal government. This was less than a week after he proposed a "responsibility fee" meant to recoup $90 billion of Troubled Asset Relief Program funding from banks Washington had bailed out, or at least some of them, as the proposal allowed still-struggling regional banks to duck the new fee.

By Monday, the number that seemed to loom largest in the financial landscape was 60, the number of votes needed in the Senate to push for a confirmation vote for Bernanke's second term.

Even that number appeared less than solid, however, as several Republicans were expected to vote yes on the first measure -- the measure that would force a confirmation vote -- and vote no for Bernanke's second term, The Wall Street Journal reported Monday.

With White House staff churning out sound bites during the weekend that expressed confidence in the chairman and President Obama making a few phone calls on his behalf, bean counters tallied 31 senators affirming their intention to approve Bernanke's second term and 17 publicly stating they would vote the other way, the Journal said.

With markets wobbling, the White House issued a statement Friday attempting to reassure the public Bernanke was a done deal -- an effort to suggest there was something left in Washington on which investors could rely.

The new dynamic -- or the new chaos -- is reflected in concerns over financial reform measures large and small. Even standing by the president's side as the $90 billion fee proposal was announced, Chris Dodd of Connecticut, chairman of the Senate Finance Committee, said he was not committed to the proposal, The New York Times reported.

"I have to look at things. I wouldn't say I support it yet at all," Dodd said.

Finally, there's at least half a chance the burgeoning uncertainty was more of a catalyst than a reason for numbers to tumble on the big boards.

"We've come a long way in a short period of time. You can't keep winning. You need entrenchment," Standard & Poor's market analyst Howard Silverblatt said.

In market movement Monday, the Nikkei 225 index in Japan lost 0.74 percent, while the Shanghai composite in China dropped 0.96 percent. The Hang Seng index in Hong Kong shed 0.62 percent, while the Sensex in India fell 0.47 percent.

In Australia, the S&P/ASX 200 lost 0.69 percent.

In midday trading in Europe, the FTSE 100 in Britain rose 0.1 percent, while the DAX 30 in Germany lost 0.33 percent. The CAC 40 in France added 0.03 percent, while the pan-European DJ Stoxx 50 lost 0.18 percent.

Related UPI Stories
Trending Stories