The Dow Jones Industrial Average hit its lowest level in six years on
Thursday as hopes of a bailout of the broken-down U.S. auto industry
all but disappeared. Meanwhile, financial stocks skidded on fears that the
Treasury Department's Troubled Asset Relief Program would not be enough to alleviate the
credit crisis.
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Citigroup Inc., which looks like it may need to dip a little deeper into
the TARP piggy bank, plunged 26.41% to close at $4.71, its lowest level in 15 years,
following a roughly 23% drop Wednesday as credit default swap spreads
on its debt widened after it took on over $17 billion in assets
from structured investment vehicles and closed one of its hedge funds.
Despite
concerns that an auto bailout may not happen, General Motors Corp.
gained 3.23% to $2.88 per share as GMAC LLC, the lender partially owned by GM, said on Thursday that it has applied to become a bank holding
company and would seek a cash infusion under the government's $700
billion capital purchase program. GM owns 49% of GMAC with Cerberus
Capital Management LP owning the rest.
Everyone wants a little
piece of the TARP these day. Bond insurer Ambac Financial Group Inc.
late last month lobbied for financial guarantors to be included under
the TARP program. Ambac has yet to get an answer from the Treasury, so
in lieu of getting a financial injection to protect against future
losses, it tore up some CDS contracts on Thursday to eliminate
potential related losses. This was for a price as Ambac paid
counterparties $1 billion to terminate CDS contracts for $3.5 billion
in CDO exposures. The stockholders seemed happy to cut out a portion of
the dark CDS cloud as Ambac rocketed 65.79% to close at $1.26. - Michael
Rudnick
