By Rodney Drinnen
SPOKANE, WASHINGTON (Worthy News) -- Cheer, hope, and optimism seemed the main emotions during the historic inauguration of President Barack Hussein Obama as the United States' first African-American president.
Yet, at Wall Street in New York, investors weren’t celebrating, as governments around the world tried to shore up their financial systems by taking over banks in what critics warned were ill-advised measures to prevent further economic meltdown in their countries.
The Dow Jones showed its worst performance of any Inauguration Day for the last 124 years, while Japan’s Nikkei, Britain’s FTE, Germany’s DAX, and France’s CAC-40 indexes also declined.
In New York, traders would pause at times to view the inauguration ceremony, and to see what newly elected President Obama would say about the U.S., and global, economy. Apparently not enough. The Dow fell below 8,000, and bad financial news emerged from countries around the world.
The British government, which already injected money into the Bank of Scotland on Monday, January 19, suggested more steps would be needed.
The move, increasing the state's role in the British economy, came after Washington assisted Citigroup Inc. and Bank of America, to prevent the bankruptcy of institutions, once viewed as darlings of the financial world.
Bank of America received about $25 billion in capital injections from the Treasury bailout fund, the Troubled Asset Relief Program, or TARP. That includes $10 billion for Merrill Lynch & Co., which Bank of America bought on New Years' Day.
Citigroup was, at least briefly, rescued late last year, receiving a $20 billion capital infusion from TARP, after earlier obtaining $25 billion — as well as government backing for billions in risky assets held by the troubled bank.
Across the ocean, Ireland's parliament voted to complete the nationalization of Anglo Irish Bank, the country’s third largest, in a second round of government bailouts.
Analysts said the latest moves seemed part of efforts by governments worldwide to eventually nationalize key banks and other financial institutions.
Brian Gardner, senior vice president for Washington research at investment bank Keefe, Bruyette & Woods, told the Washington Post newspaper that these developments "underscored the need for Obama to set his sights on repairing the banking system, before turning his attention to a broader economic stimulus package."
He stressed the president should urgently fix the financial system. "This all started from a crisis in the financial system, and it’s going to be solved by fixing the financial system," Gardner was quoted as saying.
The Obama administration has suggested creating a state-owned "bad bank" that would buy up loans and other troubled assets, seen as major causes of the financial crisis, and sell them later at what analysts fear will be a "substantial loss".
Several other countries created such banks, including Sweden, to revitalize lending. Yet, "bad banks" have never been tested on a scale proposed by the Obama administration.
Officials say it is likely that Obama's bank plan will require more than the roughly $320 billion remaining in the financial rescue program approved by the U.S. Congress last fall.
Financial advisers warn that many bank nationalizations can be expected as the U.S. and other governments struggle to overcome the world's worst economic crisis in decades.
The financial crisis is one of the biggest challenges faced by President Obama, who has appeared more somber in recent days. He already aknowledged that the road to recovery would "not be easy," but said he remained hopeful of a better future for America, and the world.